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Your company will receive USD10,000,000 in 3 months' time and will keep the funds for a 3-month period to cover a payable 6 months from
Your company will receive USD10,000,000 in 3 months' time and will keep the funds for a 3-month period to cover a payable 6 months from today. Your analysts think that interest rates may fall from their current level at 6.1% and you want to protect the return you will get until you need the funds. BNP-Paribas, a French bank, offers a FRA with an interest rate of 6% to cover the extra funds for the 3-month period 3 months from today. Your company decides to take the FRA offer from BNP-Paribas. In 3 months, the interest rate in the market is 6.1%. Match the information to the letters shown in the FRA equation below: A B D Notational Amount (SR - AR) days 360 1 + SR -E days 360 A Choose... B B Choose... C 610,000 10,000,000 D 6.0% E 3 F 6.1% 90 GER
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