A Ltd. is planning to borrow an amount of 300 crores for a period of 3 months in the coming 6 months' time from now. The current rate of interest is…
CA Final · Advanced Financial Management · MTP · May 2026
A Ltd. is planning to borrow an amount of 300 crores for a period of 3 months in the coming 6 months' time from now. The current rate of interest is 9% p.a., but it is likely to go up in 6 months' time. The company wants to hedge itself against the likely increase in interest rate. You as CFO has been asked to suggest both traditional as well as modern methods to hedge interest rate risk. Suppose the banker of A Ltd. has quoted the following Forward Rate Agreement (FRA) rates: 8.10% 8.15% 3 x 6 8.10% 8.15% 6 x 9 8.20% 8.30% 9 x 12 8.35% 8.45% A Ltd. has already issued redeemable bonds or debentures. From the information given above, choose the correct answer to the following questions:
Suggested Answer and Working Notes:
Correct Answer: Option (C)
buy FRA at offer rate.
Topics: Interest Rate Risk Management
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