Your financial firm needs to borrow 200 million by selling, Financial Management

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Your financial firm needs to borrow 200 million by selling

Your financial firm needs to borrow $200 million by selling time deposits with 270 day maturities. If interest rates on comparable deposits are currently at 2.5%, what is the cost of issuing these deposits? Suppose interest rates decline to 2%. What then will be the cost of these deposits? What position and type of hedge could be used to deal with this cost change?

A. 5m,4m, long hedge

B. 3.75m, 3m, Short hedge

C. 3.75m, 3m, long hedge

D. 4m, 5m, cds swap

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Financial Management: Your financial firm needs to borrow 200 million by selling

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Financial Management: Your financial firm needs to borrow 200 million by selling

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