a)
To determine: The type of option should corporate bank use for the macro hedge.
b)
To determine: The number of option to be purchased.
c)
To determine: The effect on the economic value of the equity if interest rates increases 50 basis points.
d)
To determine: The dollar change in value of the option position if interest rates increase by 50 basis points.
e)
To determine: The cost of the hedge if each option has a premium of $0.875 per $100 of face value.
f)
To determine: The amount of interest rate move against the hedge for the increased value of the bank to set off the cost of the hedge.
g)
To determine: The amount of interest rate move in favor of the hedge, or against the
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