You Have a USD Loan That Is Priced at 3-Month

question 72

Multiple Choice

You have a USD loan that is priced at 3-month LIBOR+50. LIBOR for the loan will be re-fixed in exactly one month. The market is quoting: 1x3 USD FRA. 1.95-98% 1x4 USD FRA. 2.07-10% 1x6 USD FRA 2.25-28% To hedge the next LIBOR fixing, you should:

• A) Sell a 1x3 FRA at 1.95%
• B) Buy a 1x3 FRA at 1.98%
• C) Buy a 1x4 FRA at 2.10%
• D) Sell a 1x4 FRA at 2.10%

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Definitions:

Small Intestine

is the part of the gastrointestinal tract between the stomach and the large intestine, where most of the digestion and absorption of food takes place.

Hydrochloric Acid

A strong acidic solution of hydrogen chloride in water, found in the stomach, where it aids in digestion and sterilization of ingested food.

Lysozymes

Enzymes that damage bacterial cell walls by catalyzing the hydrolysis of 1,4-beta-linkages between N-acetylmuramic acid and N-acetyl-D-glucosamine, found in saliva, mucus, and tears.

Bile Acids

Steroid acids found predominantly in the bile of mammals, crucial for the digestion and absorption of fats and fat-soluble vitamins in the small intestine.