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someone help me with the questions. thanks in advance A. A Japanese bank expects to lend 10 million to a Spanish firm. If the negotiations

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someone help me with the questions. thanks in advance

A. A Japanese bank expects to lend 10 million to a Spanish firm. If the negotiations go well, the loan will be disbursed one month from now. The terms of the loan have already been established: The Spanish firm is to pay a fixed interest rate of 5%. The term of the loan will be one year; interest and principal, in euros, will be repaid to the bank 1 year after the loan is made. The Japanese bank is also interested in maximising the yen-denominated wealth of its Japanese stockholders. Required: 1. Describe the nature of the Japanese bank's interest rate risk. 2. Demonstrate how the Japanese bank can use forward rate agreements (FRAS) to manage the interest rate risk it faces

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