The treasurer of a small bank has borrowed funds for 3 months at an interest rate of 5.50% and has lent funds for 9 months at 6.50%. The total amount is USD25 million. To cover his exposure created by the mismatch of maturities, the dealer needs to borrow another USD25 million for 6 months, in 3 months' time, and hedge the position now with an FRA. What is the treasurer's break-even forward rate of interest, assuming no other costs? Multiple Choice O O O 5.50% 6.00% 7.30% 6.91% 6.50%
The treasurer of a small bank has borrowed funds for 3 months at an interest rate of 5.50% and has lent funds for 9 months at 6.50%. The total amount is USD25 million. To cover his exposure created by the mismatch of maturities, the dealer needs to borrow another USD25 million for 6 months, in 3 months' time, and hedge the position now with an FRA. What is the treasurer's break-even forward rate of interest, assuming no other costs? Multiple Choice O O O 5.50% 6.00% 7.30% 6.91% 6.50%
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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The treasurer of a small bank has borrowed funds for 3 months at an interest rate of 5.50% and has lent funds for 9 months at 6.50%. The total amount is
USD25 million. To cover his exposure created by the mismatch of maturities, the dealer needs to borrow another USD25 million for 6 months, in 3
months' time, and hedge the position now with an FRA. What is the treasurer's break-even forward rate of interest, assuming no other costs?
Multiple Choice
5.50%
6.00%
7,30%
6.91%
6.50%
D
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