问答题4.ForanumberofyearsDaikonCohasbeenusingforwardrateagreementstomanageitsexposuretointerestratefluctuations.Recentlyitschiefexecutiveofficer(CEO)attendedatalkonusingexchange-tradedderivativeproductstomanagerisks.Shewantstofindoutbyhowmuchtheextracostoftheborrowingdetailedbelowcanbereduced,whenusinginterestratefutures,optionsoninterestratefutures,andacollarontheoptions,tomanagetheinterestraterisk.Sheasksthatdetailedcalculationsforeachofthethreederivativeproductsbeprovidedandareasonedrecommendationtobemade.DaikonCoisexpectingtoborrow$34,000,000infivemonths’time.Itexpectstomakeafullrepaymentoftheborrowedamountin11months’time.Assumeitis1June2015today.DaikonCocanborrowfundsatLIBORplus70basispoints.LIBORiscurrently3·6%,butDaikonCoexpectsthatinterestratesmayincreasebyasmuchas80basispointsinfivemonthstime.ThefollowinginformationandquotesfromanappropriateexchangeareprovidedonLIBOR-based$futuresandoptions.Three-month$Decemberfuturesarecurrentlyquotedat95·84.Thecontractsizeis$1,000,000,theticksizeis0·01%andthetickvalueis$25.Optionsonthree-month$futures,$1,000,000contract,ticksize0·01%andtickvalue$25.Optionpremiumsareinannual%.InitialassumptionsItcanbeassumedthatsettlementforboththefuturesandoptionscontractsisattheendofthemonth;thatbasisdiminishestozeroataconstantrateuntilthecontractmaturesandtimeintervalscanbecountedinmonths;thatmarginrequirementsmaybeignored;andthatiftheoptionsarein-the-money,theywillexercisedattheendofthehedgeinsteadofbeingsold.FurtherissuesInthetalk,theCEOwasinformedofthefollowingissues:(i)Futurescontractswillbemarked-to-marketdaily.TheCEOwonderedwhattheimpactofthiswouldbeif50futurescontractswereboughtat95·84on1Juneand30futurescontractsweresoldat95·61on3June,basedonthe$Decemberfuturescontractgivenabove.Theclosingsettlementpricesaregivenbelowforfourdays(ii)DaikonCowillneedtodepositfundsintoamarginaccountwithabrokerforeachcontracttheyhaveopened,andthismarginwillneedtobeadjustedwhenthecontractsaremarked-to-marketdaily.(iii)Itisunlikelythatoptioncontractswillbeexercisedattheendofthehedgeperiodunlesstheyhavereachedexpiry.Instead,theymorelikelytobesoldandthepositionsclosed.Required: