1. Consider the following quotes on the 3-month Eurodollar Futures contract as of Dec 2, 2016.
March 2017 | June 2017 | September 2017 | December 2017 |
98.95 | 98.815 | 98.715 | 98.57 |
What interest rate can an investor ‘lock-in’ for the coming year? Refer to the PowerPoint titled ‘Ch15_Hedging.pptx’ pages 6 and 7.
2. Please refer to the spreadsheet titled ‘Ch15_Interest_Rate_Swap_Valuation.xlsm’ and the quotes in problem 1 above. Compute the fixed rate that equates the present value of floating payments and the fixed payments for a notional $50,000m. The 4 quarters are Dec to March, March to June, June to September and September to December.