Question 4a
Marking Guide

4 (a) Impact of FRA for rate increase and decrease 2
Go long on futures 1
Selection of March futures and options 1
Number of contracts 1
Basis calculation 1
Impact of interest rate increase/decrease with futures 3
Buy call options 1
Premium calculations 1
Exercise options? 1
Impact of interest rate increase/decrease with options 3
Discussion 3–4
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Max 18