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The CFO wants to lock in low interest rates for projects that the company might start spending on in exactly 2 years. How would you
The CFO wants to lock in low interest rates for projects that the company might start spending on in exactly 2 years. How would you set up a strategy to guarantee an interest rate today for a 5-year loan of $10 million that begins in exactly two years, given that you face the following spot rates for zerocoupon bonds? Assume, that you can borrow and lend at the same rates as below. B8a. What is the annualised 5-year interest rate you can lock in given the interest rates above? Show your work for full credit. [2 marks] B8b. How would you execute this strategy? Show the exact dollar amounts you would use and which bonds you would use. [ 7 marks] Note: There is a typo in the template. This question is worth 7 marks, not 6
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