The 3-month December 2023 dollar interest rate futures contract is currently priced at 98.00. The contract has a nominal value of 1 million dollars. (1) What is the party that buys the dollar interest rate futures contract agreeing to? (ii) If you think the 3-month spot interest rates on the dollar will be around 4% in December 2023 would you buy or sell the contract?
The 3-month December 2023 dollar interest rate futures contract is currently priced at 98.00. The contract has a nominal value of 1 million dollars. (1) What is the party that buys the dollar interest rate futures contract agreeing to? (ii) If you think the 3-month spot interest rates on the dollar will be around 4% in December 2023 would you buy or sell the contract?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The 3-month December 2023 dollar interest rate futures contract is currently
priced at 98.00. The contract has a nominal value of 1 million dollars.
(1) What is the party that buys the dollar interest rate futures contract agreeing to?
(ii) If you think the 3-month spot interest rates on the dollar will be around 4% in
December 2023 would you buy or sell the contract?
(iii) How much profit in dollars would you make if you take the action based on
part (ii) and are proved right i.e. the 3-month interest rate on the dollar is 4% in
December 2023.
(iv) What 3-month dollar interest rate in June 2023 will give a break-even position
for the buyer of the contract?
(v) What is the profit (+) or loss (-) for the seller of the contract if the 3-month dollar
interest rate in December 2023 is 1%?
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