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Outline an appropriate hedging strategy

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Mr. Robert Khoo is the financial officer at Gagasan Nadi Cergas Berhad. The company has just signed an agreement with Widad Group Berhad on 31st July 2021. The agreement calls for his company to pay RM10 million on 31st July for construction raw materials from Widad Group Berhad. CIMB Investment Berhad agreed to provide Gagasan Nadi Cergas Berhad a 90-day RM22 million loan at KLIBOR + 2.75 percent interest. The 3-month KLIBOR is now quoted at 6.21 percent, while the 3-month KLIBOR futures is priced at RM93.52. Using KLIBOR futures, the interest rate will increase by 3.45 percent over the next 90 days and Gagasan Nadi Berhad Berhad's cost is locked in.

Outline an appropriate hedging strategy to protect his company from interest rate risk and determine the effective interest rate from hedging.

Reference no: EM133116885

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