Question
1) If you are short a Eurodollar futures with notional amount of one million dollars. and it moves from an IMM of 96.5 to an
1) If you are short a Eurodollar futures with notional amount of one million dollars. and it moves from an IMM of 96.5 to an IMM of 96.66, how much is your gain or loss to the nearest dollar, entering a loss as a negative number.
2) In six months you want to borrow ten million dollars for a short period of two months, using a 60-day LIBOR rate. Since the LIBOR rate a year from now is unknown today, you are thinking of hedging that with an FRA. Suppose that the forward rate is 3.7% today but at expiration of the FRA, the LIBOR spot rate is 5%. What is the payoff (positive or negative) to you from the FRA at expiration? Answer to the nearest dollar, omitting the dollar sign.
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