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Question - The date is 2nd September and LIBOR [reference rate] is currently 0.85%. UCI Plc. have been assessing their cash flow requirement and know that they will need a £15m loan in 6 months' time. The loan will be required for 6 months.

UCI Plc. have a quote from their bank which looks like the following: FRA 6 v 12 1.15% - 1.05%.

The firm agrees to enter the transaction as above.

Calculate the payment from/to the bank from the commitment to the FRA and demonstrate how this affects the borrowing costs of the loan.

Given that the LIBOR reference rate has moved to: . 6-month LIBOR is 1.32% Or, ii. 6-month LIBOR is 0.95%.

Reference no: EM133012037

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