The current yield curve is:

Term(days) Yield(%p.a.)

90 8.65

180 8.95

270 9.25

a) What is the 180-day rate 90 days ahead?

b) In 90 days we will need to borrow $1m for 180 days. Explain the following hedging devices and outline the advantages and disadvantages of each one.

i) Money market transactions

ii) Bank bill futures

iii) Another hedging instrument

c) Should you hedge? What do you get out of hedging?