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Surfs - Up Security Savings is considering the problem of trying to raise $ 8 0 million in money market funds to cover a loan
SurfsUp Security Savings is considering the problem of trying to raise $ million in money market funds to cover a loan request from one of its largest corporate customers, which needs a sixweek loan. Assume that market interest rates are at the levels indicated below: Federal funds, average for week just concludedDiscount window of the Federal Reserve BankCDs prime rated, secondary market:One monthThree monthsSix monthsEurodollar deposits three monthsCommercial paper directly placed:One monthThree months Unfortunately, SurfsUps economics department is forecasting a substantial rise in money market interest rates over the next six weeks. What would you recommend to its funds management department regarding how and where to raise the money needed? Be sure to consider such cost factors as legal reserve requirements, regulations, and what happens to the relative attractiveness of each funding source if interest rates rise continually over the period of the proposed loan.Alternative scenario: What if SurfsUps economists are wrong and money market rates decline significantly over the next six weeks? How would your recommendation to the funds management department change on how and where to raise the funds needed?
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