Deposit 1

 Nominal value of the deposit 1350000

 Interest rate 6M Libor

 Intended date of deposit (months from present date) 7

 Intended date of withdrawal of the deposit (months from

  13.00
present date)

Deposit 2
 Nominal value of the deposit 950000
 Interest rate 3M Libor

 Intended date of deposit (months from present date)           9.00

 Intended date of withdrawal of the deposit (months from

   12.00
present date)

LIBOR SPOT RATE 1 MAY 2014

Spot LIBOR rate on 01.05.20X4

 1M Libor 4.31%
 2M Libor 4.37%
 3M Libor 4.40%
 4M Libor 4.46%
 5M Libor 4.49%
 6M Libor 4.52%
 9M Libor 4.54%
 12M Libor 4.61%
 15M Libor 4.68%
 18M Libor 4.73%
 24M Libor 4.79%

 1. Identify which FRA contracts should be opened to hedge the deposits in question. Indicate the symbols of the contracts to
type of position (long or short) and the opening price (quoted BID or ASK).
 1. Identify which FRA contracts should be opened to hedge the deposits in question. Indicate the symbols of the contracts to
type of position (long or short) and the opening price (quoted BID or ASK).

In order to hedge the deposits in question, a short position should be taken on:
7x13 FRA (for deposit 1)
9x12 FRA (deposit 2)

opening price for deposit 1 (BID): 4.62%

opening price for deposit 2 (BID): 4.63%

2. Value the open FRAs as at 1 June 20X4. If LIBOR is not quoted for the relevant date, calculate it using linear interpolation. A
each month has 30 days.

deposit 1:
start date 1/1/2015
end date 7/1/2015
valuation date 6/1/2014

FRA RATE 4.62%

spot rate on start date (01.01.2015) (7M LIBOR) 4.526666667%

time remaining to 01.01.2015 from valuation date (in years) 0.594444444444444

spot rate on end date (01.07.2015) (13M LIBOR) 4.63%

time remaining to 01.07.2015 from the valuation date (in years) 1.09722222222222

forward rate for the duration of the contract (annually capitalised) 4.76%

duration of the contract (days) 210

annual 360

forward rate for the duration of the contract 4.05%

valuation:
(RFRA-Rf) 0.57%
((RFRA-Rf) * N * D) / Y 4450.24656921618
(1 + R2) 104.63%
(1 + R2) ^ T2 1.05095090382363

FRA VALUE 4234.49521097993

deposit 2:
start date 3/1/2015
end date 6/1/2015
valuation date 6/1/2014

FRA RATE 4.63%

spot rate on start date (01.03.2015) (9M LIBOR) 4.540000000%

time remaining to 01.03.2015 from valuation date (in years) 0.758333333333333

spot rate on end date (01.06.2015) (12M LIBOR) 4.61%

time remaining to 01.07.2015 from the valuation date (in years) 1.01388888888889

forward rate for the duration of the contract (annually capitalised) 4.82%

duration of the contract (days) 90

annual 360

forward rate for the duration of the contract 4.84%

valuation:
(RFRA-Rf) -0.21%
((RFRA-Rf) * N * D) / Y -496.686582110113
(1 + R2) 104.61%
(1 + R2) ^ T2 1.04675501946615

FRA VALUE -474.501266173459

  EUR

 months
start

 months
end

 EUR

 months
start

 months
end

symbols of the contracts to be opened,

or ASK).
symbols of the contracts to be opened,
or ASK).

using linear interpolation. Assume that

january february march april may june july august september

january february march april may june july august september

october november december

october november december