ABC International Has Borrowed $4,000,000 at LIBOR Plus a Lending

Multiple Choice

ABC International has borrowed $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London.Three month LIBOR is currently 5.5 percent,but ABC is worried about an increase in three-month LIBOR 3 months from now.What could they do to hedge?

A) Buy a 3 × 6 FRA in the amount of $4 million.
B) Sell a 3 × 6 FRA in the amount of $4 million.
C) Buy a 3 × 3 FRA in the amount of $4 million.
D) Buy a 3 × 9 FRA in the amount of $4 million.