Question $9$

$1$ pts

A fund manager hedges a planned future investment in NCDs using a $2$:$5$ FRA at $3\mathrm{.}50\%.$ At the settlement date, the spot rate is $4\mathrm{.}00\%$ and the fund manager will:

pay a cash settlement

borrow in the FRA market for $3\mathrm{.}5\%$

invest in the FRA market for $3\mathrm{.}5\%$

receive a cash settlement