View the step-by-step solution to:

# Homework 3 Adapted from Fundamentals of Futures and Options Markets, 7th ed., John C. Hull. Chapter 6 Q1. Suppose your company needs to borrow \$10

Need the attached 2 questions answered in Excel with Formulas if applicable.

Homework 3 Adapted from Fundamentals of Futures and Options Markets, 7th ed., John C. Hull. Chapter 6 Q1. Suppose your company needs to borrow \$10 million for 3 months starting on September 2016. If your company wants to lock in the borrowing interest rate, what should you do now? Be specific. What is the interest rate can you lock in now? Chapter 7 Q2. In an existing (not new) interest rate swap, your company receives 5.00% (fixed) per annum and pays 3­month LIBOR in return on a notional principal of \$100 million with payments being exchanged every 3 months. The swap has a remaining life of 13 months. This implies the next cashflow will be exchanged in 1 month and the last exchange occurred 2 months ago. The current LIBOR rates for different maturities are given as follows. Maturity LIBOR (with continuous compounding) 1 month 3.00% 4 months 3.25% 7 months 3.50% 10 months 3.75% 13 months 4.00% On the other hand, the 3­month LIBOR rate 2 months ago (when the last cash exchange occurred) was 4.00% per annum with quarterly compounding. What is the current value of this swap to your company? Hint: See pages 170­175.
Sign up to view the entire interaction

#### Top Answer

Hi, I have completed your solution. Kindly check and let me know in case of any... View the full answer

Amount to be borrowed
Tenure
Starting time \$10,000,000
3
Sep-16 In order to lock the future interest rate on the borrowing, the company has to make use of Eurodollar futures interest rate. This is...

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents
• ### -

Question & Answers

Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

Ask a Question
Ask a homework question - tutors are online