As Treasurer of ABC Plc, you are also expected to recommend and implement an Interest Rate Risk-Management strategy for the firm.

Assume now is April 2014.
ABC have identified a €10m borrowing requirement that will occur in October of this year (say exactly 6 months from now)
It is expected that they will have sufficient resources to repay that loan in July 2015 (say 15 months from now).
Your Economics unit forecast that interest rates may rise, you should prepare Hedging strategies using the following tools.
Today, you observe a bank quoting the Following FRA strip:
6 v 9 4.90/5.00
6 v 12 5.00/5.10
6 v 15 5.10/5.20
6 v 18 5.20/5.30
6 v 21 5.30/5.40
Show the outcome of the hedge if at the time the borrowing arises prevailing LIBOR is at 4.00%. Calculate the amount payable and show the timing and direction if that payment. Assume a 360 day year and each month is 30 days.
The treasury team have also gathered data from the futures market:
Assume current Borrowing rates are 5.00%
THE STIR contract on Euro is today trading as follows:
Jun 14 : 95.00
Sep 14 : 94.70
Dec 14 : 94.40
Mar 15 : 94.10
Jun 15 : 93.90
Contract Specification:
Contract on Euro 250,000
Tic calculated as 0.01%
Tic value €6.25

Show the outcome of using the Futures market if, at time of borrowing prevailing interest rates are at 4.00% and your chosen contract is trading at 96.00 on the futures market.

From the Options Dealers: All Forward Start 6 months, for 9 months hedging:
Interest Rate Cap, Strike 5%: Premium 2% of Principal
Interest Rate Cap, Strike 6%: Premium 1.5% of Principal
Interest Rate Floor, Strike 2%: Premium 0.75% of Principal
Interest Rate Floor, Strike 1%: Premium 0.25% of Principal

Using the data provided construct a suitable Interest Rate management strategy. You should evaluate all possible scenarios permitted by the attached data (Maximum strategies should be 3), selecting one course of action and recommending why you chose that with a full rationale supporting that decision.