Demonstrate how FRAs, BAB futures and interest rate swaps establishes the company's cost of funds for the initial issue of the bills in a bills facility. For the purposes of your demonstration, assume: the two-year bill facility uses 90-day BABs with a face value of $1 million; the facility is being organised in May for commencement in mid June 2022; when the bill facility was being organised the sune 2022 BAB futures price was 94.45 and the September 2022 BAB futures price was 94.65; the two-year swap rate in June is 5.45%pa the 90-day spot rate was 5.35%pa in mid-June (the settlement date for June 2022 futures) the June FRA rate matches the relevant BAB futures rate
Demonstrate how FRAs, BAB futures and interest rate swaps establishes the company's cost of funds for the initial issue of the bills in a bills facility. For the purposes of your demonstration, assume: the two-year bill facility uses 90-day BABs with a face value of $1 million; the facility is being organised in May for commencement in mid June 2022; when the bill facility was being organised the sune 2022 BAB futures price was 94.45 and the September 2022 BAB futures price was 94.65; the two-year swap rate in June is 5.45%pa the 90-day spot rate was 5.35%pa in mid-June (the settlement date for June 2022 futures) the June FRA rate matches the relevant BAB futures rate
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
Problem 1PS
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Demonstrate how FRAs, BAB futures and interest rate swaps establishes the company's cost of funds for the initial issue of the bills in a bills facility.
For the purposes of your demonstration, assume:
the two-year bill facility uses 90-day BABs with a face value of $1 million;
the facility is being organised in May for commencement in mid June 2022;
when the bill facility was being organised the sune 2022 BAB futures price was 94.45 and the September 2022 BAB futures price was 94.65;
the two-year swap rate in June is 5.45%pa
the 90-day spot rate was 5.35%pa in mid-June (the settlement date for June 2022 futures)
the June FRA rate matches the relevant BAB futures rate
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