ABC International Has Borrowed $4,000,000 at LIBOR Plus a Lending

question 18

Multiple Choice

ABC International has borrowed $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London.Three month LIBOR is currently 5.5 percent,but ABC is worried about an increase in three-month LIBOR 3 months from now.What could they do to hedge?

• A)Buy a 3*6 FRA in the amount of $4million.
• B)Sell a 3*6 FRA in the amount of $4million.
• C)Buy a 3*3 FRA in the amount of $4million.
• D)Buy a 3*9 FRA in the amount of $4million.