Suppose that a corporate treasurer wishes to take out a three-month loan of $64 million to begin in three months’ time and is concerned that interest rates will rise over the next three months....

Suppose that a corporate treasurer wishes to take out a three-month loan of $64 million to begin in three months’ time and is concerned that interest rates will rise over the next three months. Suppose that the following rates are available.

a) Demonstrate how the company treasurer would hedge risk on the above loan using a forward-forward market hedge;

b) Suppose another corporate treasurer observes the same rates and wishes to lock in a $4.8 million deposit rate in 3 months’ time because he fears interest rates are about to fall and he has funds coming in 3 months’ time.