9. Suppose your company needs 10,000,000 in three months that you will be able to...
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9. Suppose your company needs 10,000,000 in three months that you will be able to pay back nine months later. In order to hedge against a rise in interest rates in three months, the company enters into an (312) FRA with a bank at 4% FRA rate, with a notional principal of 10,000,000.
a) If in 3 months, the interest rate drops to 3%, who will pay the compensation?
b) What will be the amount paid for this compensation?
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