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Delicious77 [7]
2 years ago
6

Citibank need to borrow $1 million for 6 months starting in 2 years. Citibank is concerned about the interest rate would like to

lock in the interest rate it pays by going long an FRA with Bank of America. The FRA specifies that Citibank will borrow at a fixed rate of 0.04 for 6 months on $1 million in 2 years. If the 6 months LIBOR rate proves to be 0.01. Then to settle the FRA, what is the cash flow to Citibank at the end of 2 years
Business
1 answer:
Shkiper50 [21]2 years ago
3 0

Answer:

"$ 15,000" is the correct solution.

Explanation:

The given values are:

Agreed fixed rate,

= 0.04

LIBOR rate,

= 0.01

No. of borrowing months,

= 6

National amount,

= 1000000

Now,

The net payment will be:

= National \ principal*(Floating \ rate - Fixed \ rate)\times \frac{No. \ of \ months}{12}

On substituting the above values, we get

= 1000000\times (0.01-0.4)\times \frac{6}{12}

= 1000000\times (-0.03)\times 0.5

= -15,000 ($)

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3 years ago
If you stare at a red patch and then look at a red apple, will your experience of the redness of the apple be stronger or weaker
Montano1993 [528]
It will be weaker. According to Hering’s opponent-process model, our eyes will experience a certain level of fatigue after observing a certain object for a prolonged period of time. This level of fatigue usually happen only temporarily and you could experience the same level of color distinguish if you let your eyes rest for a while.
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3 years ago
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7 0
2 years ago
Which option is an example of a debt-funding source?
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The correct option is CREDIT UNION.
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8 0
3 years ago
Blossom Company purchases land for $150000 cash. Blossom assumes $5200 in property taxes due on the land. The title and attorney
IgorLugansk [536]

Answer:

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Explanation:

Here, we are to calculate amount recorded as the cost of the land purchased by Blossom company.

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8 0
3 years ago
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