The duration of two December Eurodollar futures contracts is 1 month 0.5 year 0.25 year 2,000,000 dollars. What is the relationship between zero rates and forward rates? All rates are continuously compounded. the forward rate is the simple average of zero rates the forward rate is always higher than the zero rates the zero rate is the weighted average of forward rates the zero rate is the simple average of forward rates. If you buy 1x4 FRA and sell Eurodollar futures contract with the same 3-month forward rate as the underlying rate at the same time, you are hedging speculating arbitraging betting on interest rates to go up. Given the following information, the 1-year forward rate in 2 years' time is All rates are continuously compounded. t 1 2 3 4 Zero rate (p. a.) 2% 2.50% 3% 3.50% AA