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.

---

Definitions:

Online

Pertains to activities or services that are accessible over the Internet.

Brand Loyalty

The tendency of consumers to continuously purchase one brand's products over its competitors' based on positive experiences or emotional connections.

Product Succeeds

When a product achieves its intended goals, such as profitability, market share, or customer satisfaction.

Satisfying Needs

The process of fulfilling basic and psychological desires or requirements of individuals or communities.