9. Based upon the implied Fed funds rate, market participants expect the Fed Funds rate after the 29 Apr 20 Fed meeting to be closest to

1. 2.75%
2. 2.90%
3. 3.15%

10. The probability of a 25bp Fed funds hike at the 16 Sep 20 FOMC meeting, implied by the futures market is closest to

1. 100%
2. 50%
3. 70%

11. The term structure of Fed Funds implied by the futures market is

1. Upward sloping
2. Upward sloping, then a drop
3. Downward sloping

12. In addition to analyzing market expectation of short-term interest rate changes, Tomori is trying to determine the markets inflation expectations. To evaluate the markets inflation expectations, Tomori is most likely to asses

1. VIX futures market
2. CPI swap market
3. Dividend swap market

Sarah Tomori, a CUNTY QC Alumni, is a fixed income analyst at Chelsea Investments. Tomori specializes in money market instruments. She is exploring whether her fund should be equal weight, underweight or overweight duration for the upcoming year. Target duration is typically 12 months, but Tomori is permitted to drift from the target duration by plus or minus 4 months depending on her view of the market. As part of her initial research, Tomori investigates the market for Fed Fund Futures. Tomori believes she can extract the market expectations of short-term interest rate changes from the futures market. Current Fed Fund market detail is as follows: The current federal funds rate target range is set between 2.75% and 3.00%. The strip of monthly expiry Fed Fund futures is shown below. ZQJO is the future expiring on the last day in Apr 2020 and ZQJ1 is the future expiring on the last date in Apr 2021. Final settlement occurs on the first business day following the last trading day. ZQJO 97.125 ZQKO 97.105 ZQMO 97.085 ZQNO 97.045 ZQQO 96.955 ZQUO 96.95 ZQVO 96.865 96.845 ZQZO 96.625 ZQF1 96.620 ZQG1 96.595 ZQH1 96.880 ZQJ1 96.870 The Federal Open Market Committee (FOMC), the 12-member group that sets the Fed Fund's discount rate is scheduled to meet on the dates shown below. Assume the FOMC always changes the target rate range in increments of 25bp. Meeting Date 29 Apr 20 10 Jun 20 29 Jul 20 16 Sep 20 5 Nov 20 16 Dec 20 27 Jan 21 37 Mar 3 Days to Meeting 18 60 109 158 209 249 291 340 Sarah Tomori, a CUNTY QC Alumni, is a fixed income analyst at Chelsea Investments. Tomori specializes in money market instruments. She is exploring whether her fund should be equal weight, underweight or overweight duration for the upcoming year. Target duration is typically 12 months, but Tomori is permitted to drift from the target duration by plus or minus 4 months depending on her view of the market. As part of her initial research, Tomori investigates the market for Fed Fund Futures. Tomori believes she can extract the market expectations of short-term interest rate changes from the futures market. Current Fed Fund market detail is as follows: The current federal funds rate target range is set between 2.75% and 3.00%. The strip of monthly expiry Fed Fund futures is shown below. ZQJO is the future expiring on the last day in Apr 2020 and ZQJ1 is the future expiring on the last date in Apr 2021. Final settlement occurs on the first business day following the last trading day. ZQJO 97.125 ZQKO 97.105 ZQMO 97.085 ZQNO 97.045 ZQQO 96.955 ZQUO 96.95 ZQVO 96.865 96.845 ZQZO 96.625 ZQF1 96.620 ZQG1 96.595 ZQH1 96.880 ZQJ1 96.870 The Federal Open Market Committee (FOMC), the 12-member group that sets the Fed Fund's discount rate is scheduled to meet on the dates shown below. Assume the FOMC always changes the target rate range in increments of 25bp. Meeting Date 29 Apr 20 10 Jun 20 29 Jul 20 16 Sep 20 5 Nov 20 16 Dec 20 27 Jan 21 37 Mar 3 Days to Meeting 18 60 109 158 209 249 291 340