Question 2a
Marking Guide
(a) Buy put options and number of contracts 1
Futures prices if interest rates increase or decrease 1
Option contracts calculations: either exercise price 3
Option contract calculations: second exercise price (or justification for calculations of just one exercise price) 2
Swap: Keshi Co initially borrows at the floating rate and resulting advantage 2
Swap impact 2
Effective borrowing rate 1
Discussion and recommendation 3–4