Find the Rate on a Pure Discount Loan Hedged with a Long

Multiple Choice

Find the rate on a pure discount loan hedged with a long FRA if the loan is for $10 million and matures in 30 days,the FRA is 30-day LIBOR,the fixed rate on the FRA is 4 percent,and LIBOR at the time the loan is taken out is 5 percent.

A) 4.87 percent
B) 0.25 percent
C) 5.18 percent
D) 4.13 percent
E) 2.04 percent