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You observe the market prices of 3 Month Sterling Futures (500,000 points of 100%) Maturity Price 30 Sept 2019 31 Dec 2019 31 Mar 2020

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You observe the market prices of 3 Month Sterling Futures (500,000 points of 100%) Maturity Price 30 Sept 2019 31 Dec 2019 31 Mar 2020 30 Jun 2020 99.00 98.72 98.54 98.14 a) Three month Sterling Libor is currently 0.75 %. If three month Sterling futures are priced as above, what does this tell us about expectations of future rates of Sterling interest? [4 marks]

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