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Q47) In an FRA, the buyer agrees to pay the seller A) the increased interest cost if interest rates increase above the agreement rate.
Q47) In an FRA, the buyer agrees to pay the seller
A) the increased interest cost if interest rates increase above the agreement rate.
B) the increased interest cost on a notional amount if interest rates fall below an agreement rate.
C) the increased interest cost on a notional amount if interest rates rise above an agreement rate.
D) none of the options
Q48) In an FRA, the seller agrees to pay the buyer
A) the increased interest cost on a notional amount if interest rates fall below an agreement rate.
B) the increased interest cost if interest rates fall below the agreement rate.
C) the increased interest cost on a notional amount if interest rates increase above the agreement rate.
D) none of the options
Q49) ABC International has borrowed $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London. Three month LIBOR is currently 5.5 percent, but ABC is worried about an increase in three-month LIBOR 3 months from now. What could they do to hedge?
A) Buy a 3 × 9 FRA in the amount of $4 million.
B) Buy a 3 × 6 FRA in the amount of $4 million.
C) Sell a 3 × 6 FRA in the amount of $4 million.
D) Buy a 3 × 3 FRA in the amount of $4 million.
