BP needs to borrow USD3 million in 3 months for a six-month period. To lock in the rate on this loan, BP buys a 3 × 6 FRA on LIBOR at 5.80% from Citibank for a notional principal of USD3 million. In 3 months' time, LIBOR6 is 6.20%. How much will Citibank pay BP? (Assume 360 days in a year). O a. USD5,830.90 O b. USD11,299.44 O c. USD11,342.16 O d. USD5,819.59 O e. None of the options in this question are correct.
BP needs to borrow USD3 million in 3 months for a six-month period. To lock in the rate on this loan, BP buys a 3 × 6 FRA on LIBOR at 5.80% from Citibank for a notional principal of USD3 million. In 3 months' time, LIBOR6 is 6.20%. How much will Citibank pay BP? (Assume 360 days in a year). O a. USD5,830.90 O b. USD11,299.44 O c. USD11,342.16 O d. USD5,819.59 O e. None of the options in this question are correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:BP needs to borrow USD3 million in 3 months for a six-month period. To lock in the rate on this loan, BP buys a 3 x 6 FRA on LIBOR at
5.80% from Citibank for a notional principal of USD3 million. In 3 months' time, LIBOR6 is 6.20%. How much will Citibank pay BP? (Assume
360 days in a year).
a. USD5,830.90
b. USD11,299.44
c. USD11,342.16
d. USD5,819.59
е.
None of the options in this question are correct.
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