Multiple Choice
A bank agrees to buy from a customer a "three against six" FRA at the market rate for such instruments. How can the bank hedge this obligation?
A) Go long a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate financed by going short a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate.
B) Go short a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate; go long a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate.
C) Borrow a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate.
D) None of the above
Correct Answer:
Verified
Correct Answer:
Verified
Q42: The major legislation controlling the operation of
Q43: Eurocredits<br>A)are credit cards that work in the
Q44: The most widely used futures contract for
Q45: LIBOR<br>A)is the London Interbank Offered Rate.<br>B)is the
Q45: The models that the credit rating firms
Q47: Banking tends to be<br>A)a low marginal cost
Q48: Edge Act banks are so-called becauseE. Edge
Q50: Teltrex International can borrow $3,000,000 at LIBOR
Q75: A U.S.-based multinational bank<br>A)would not have to
Q90: An Edge Act bank is typically located