TDK Industries approaches a bank in April to organise financing through a 180-day bank bill facility.The facility will begin in June, using 90-day bank bills with a total face value of $10 million.The company wishes to know what they can do now to hedge against interest rate risk.The June six-month swap rate is 4.5%, and it turns out that the 90-day BBR is 4% in June and 5% in September.Calculate the effective interest rate established for the duration of the bill facility, through the use of a swap contract.

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The Answer of TDK Industries approaches a bank in April to organise financing through a 180-day bank bill facility.The facility will begin in June, using 90-day bank bills with a total face value of $10 million.The company wishes to know what they can do now to hedge against interest rate risk.The June six-month swap rate is 4.5%, and it turns out that the 90-day BBR is 4% in June and 5% in September.Calculate the effective interest rate established for the duration of the bill facility, through the use of a swap contract.

TDK Industries Approaches a Bank in April to Organise Financing