The treasurer of Company A expects to receive a cash inflow of $15,000,000 in 90 days. The treasurer expects short-term interest rates to fall during the next 90 days. In order to hedge against this risk, the treasurer decides to use a FRA that expires in 90 days and is based on 90-day LIBOR. The FRA is quoted at 4%. At expiration, LIBOR is 4.5%. Assume that the notational principal on the contract is $15,000,00.

Calculate the payoff of entering the FRA. (Hint: you need to firstly figure out whether Company A is interested in Long or Short)

bd = 9 cm

step-by-step explanation:

in a 30°-60°-90° triangle, the ratio of side lengths is 1 : √3 : 2. that is, the longest side (hypotenuse) is twice the length of the shortest side.

all of the triangles in your geometry are 30°-60°-90° triangles. ac is the hypotenuse of δacd, and the short side of δabc.

the short side ad of δacd will be half the length of ac, so 3 cm. the hypotenuse ab of δabc will be twice the length of ac, so 12 cm. segment bd is the difference of the lengths ab and ad, so is

bd = ab -ad

bd = 12 cm - 3 cm = 9 cm

comment on side length ratios

you can figure the ratios of side lengths in a 30°-60°-90° triangle by considering the trig ratios of the angles. or you can figure the length of the altitude of an equilateral triangle of side length 2 using the pythagorean theorem.

i'm pretty sure the answer is 60.

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