LIBOR RATE ??

CFA Level I
#1

a company made a loan of 100 million pay 90day libor plus 1.5% margin . CFO expect interets rate going down based on dealer quotes 60 day libor =0.045 90day libor =0.044 120 libor =0.042 so cfo short 100 m in a 3 -month FRA but when contract expire , 90day libor is 4.5% how much cfo pay/collect from dealer? answer 24,722 i just no clue how they get that

#2

i THINK he discounted the amount in three months time when he wil actually make out the loan…

#3

Short. Rates up, Pay Diff at settlement .1% Undiscounted = .1% * (90/360) * 10,000,000 = 25,000 Disounted to PV = 25,000 / (1.045)^(90/360) = 24,722

#4

[(.045-.059)(90/360)]/ 1+(.059)(90/360)? I don’t know! Dammit, where am I f’in up?

#5

You are right. They used striaght LIBOR