Exam 6: Interest-Rate Forwards Futures

A $100 notional 6×12 FRA has the following features at inception.The first six month period is 182 days and the second is 183 days.The locked-in rate on the FRA is 6%.After one month the 5×11 FRA is trading at a fair strike of 6.2% with 151 days in the first five month period.What is the value of the FRA to the buyer if the five-month Libor rate at this point is is 5%?

A long position in a eurodollar futures contracts expiring in June may be used to hedge interest-rate exposure resulting from a planned

Bonds A and B both have a duration of exactly one year.An equally-weighted portfolio of these bonds will have a duration of

Eurodollar deposits are

You anticipate a three-month borrowing in 6 months' time.To hedge the interest-rate exposure you can go either

Eurodollar deposits follow the money-market day-count convention.Suppose a deposit is made for 92 days at a Libor rate of 4% on a notional amount of $100.The interest amount is

The September eurodollar contract is trading at 95.You have a 90-day borrowing commencing in September for $500,000,000 that you wish to hedge using futures.How many eurodollar futures contracts should you buy (rounded off to the nearest integer)?

You are long an $3 \times 6$ FRA and long a eurodollar futures contract expiring in 3 months.Assume the fixed rate in the FRA is the same as the rate locked-in via the eurodollar futures contract.If interest rates jump down by 100 basis points,

You plan to borrow $1,000,000 for six months (183 days)in six months' time (182 days).The current Libor rate for six months is 6%.You want to hedge your interest-rate exposure by using 90-day eurodollar futures contracts that mature in six months.Using PVBP analysis,how 90-day eurodollar futures contracts are needed for this hedge?

A long position in a $6 \times 9$ FRA can be replicated using

You are given the following data concerning a 6×12 FRA.The first six-month period is 182 days and the second is 183 days.The Libor rate for six months is 5% and for one year is 6%.The arbitrage-free price of the 6×12 FRA,assuming the Actual/360 day-count convention,is

You are short an $3 \times 6$ FRA and short a eurodollar futures contract expiring in 3 months.Assume the fixed rate in the FRA is the same as the rate locked in via the eurodollar futures contract.If interest rates jump up by 100 basis points,

Suppose the duration of a bond portfolio is 2.This means

The payoff of the FRA has the following property

When you are short a position in a $3 \times 6$ FRA,you are effectively

All else being equal,a bond with a higher coupon has a duration that is ________ than that of a bond with a lower coupon.

Your bond portfolio has a value of $10,600,000 with a duration of 2.2 years.How many 90-day US Treasury bill futures contracts do you need to hedge this exposure if the futures contract is priced at $995,000? Assume you are carrying out duration-based hedging.

Consider a 6×12 FRA where the underlying six-month period is 183 days and the notional is $100.The FRA fixed rate is 5%.At maturity of the contract the underlying Libor for six months is 7%.What is the settlement amount on the FRA? Assume the Actual/360 convention.

ABC Inc.has to borrow money to undertake a seasonal business expansion in six months time.They will need additional working capital funding for six months and wish to hedge themselves against a rise in interest rates in six month's time.They should

Ceteris paribus,as interest rates rise,which of these statements is most likely to be true?