Manzini Mining Pty needs to borrow E150 million from Standard Bank in three months’ time for exploration. The Board of Directors is concerned that interest rates may rise in the near future. Hence, the company bought a 3 x 6 forward rate agreement (FRA) at a 5.20% interest rate. If the reference rate rises to 6.70%, what is the settlement amount and the present value of the settlement amount due to Manzini Mining Pty?
a.
Settlement amount is E500,000 & PV of the settlement amount is E462, 962
b.
Settlement amount is E250,000 & PV of the settlement amount is E246, 962
c.
Settlement amount is E562, 500 & PV of the settlement amount is E555,446
d.
Settlement amount is E562, 500 & PV of the settlement amount is E553,478