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Calculate the three-month libor

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Reference no: EM132953070

ABC International has borrowed $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on

  1. A three-month rollover basis from Barclays in London. Three month LIBOR is currently 5.5 percent, but
  2. ABC is worried about an increase in three-month LIBOR 3 months from now. What could they do to hedge?

Please choose one of the following:

  1. Sell a 3 × 6 FRA in the amount of $4 million.
  2. Buy a 3 × 6 FRA in the amount of $4 million.
  3. Buy a 3 × 3 FRA in the amount of $4 million.
  4. Buy a 3 × 9 FRA in the amount of $4 million.

Reference no: EM132953070

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