Answer:
c. $8.63
Explanation:
Missing word <em>"The forward LIBOR rate is 7%. All rates are compounded semiannually. A. $8.88
, B. $9.12
, C. $8.63
, D. $9.02"</em>
Principal = $1000, FRA Rate = 9 % per annum, LIBOR after 2 years = 7 % per annum, Compounding Frequency: Semi-Annual, Risk-Free Rate = 6 % per annum
The FRA matures 2 years or 24 months from now. Further, the Interest Rate that the FRA hedges will create an interest expense only at the end of the LIBOR loan period which is an additional 6 months after the 24 month period.
Hence, Exchange of Interest Expense at the end of 30 Months = (FRA Rate - LIBOR) x Principal (calculated on a semi-annual basis)
= (0.045 - 0.035) * 1000
= $10
Current Value of FRA = Present Value of Interest Expense at the end of the 30 Months Period
= 10 / [1+(0.06/2)]^(30/6)
= $8.6261
= $8.63
Answer:
1. Market Equilibrium, 2. Interest Rate, 3. Rationing, 4. Supply Shock, 5. Excess Supply, 6. Excess Demand, 7. Price Floor
Explanation:
1. The point at which quantity demanded and quantity supplied are equal: <u>Market Equilibrium </u>
2. The financial and opportunity costs consumers pay in searching for a good or service : <u>Interest Rate </u>
3. A system of allocating scarce goods and services by criteria other than price: <u>Rationing </u>
4. A sudden drop in the supply of a good: <u>Supply (decrease - leftward shift) shock </u>
5. Any situation in which quantity supplied exceeds quantity demanded: <u>Excess Supply </u>
6. Any situation in which quantity demanded exceeds quantity supplied: <u>Excess Demand </u>
7. A government-mandated minimum price that must be paid for a good or service: <u>Price Floor (Minimum Support Price)</u>
Answer:
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Bill Gates (1955-), is a well-known American entrepreneur, investor. Gates launched Microsoft and has been on the Forbes since 1987. He was born and raised in Seattle, Washington and still currently lives in Seattle.