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

question 94

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

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Definitions:

Recall

The act of retrieving information or memories from one's past without the aid of specific cues for retrieval.

List Learning

is a memory process that involves remembering a series of items or elements in a particular order.

Sensory Memory

A type of memory that holds sensory information for a few seconds after the item is perceived.

Visual Search

The process of visually scanning an environment or scene to locate a particular object or feature among other distractors.