Exam 6: Interest-Rate Forwards Futures

You are long 5 eurodollar futures contracts. If the Libor rate underlying the contract increases by 5 basis points, your position gains the following value:

You borrow money at Libor with a floating-rate note for one year with two semi-annual payments. What position do you need to add to this note to fix the cost of borrowing for the entire year?

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

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,

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

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%?