homework question chapter 11 exercise 4

Re: Question Hwk 247S (bis)
From:
To:
Subject:
Date:
第 1 頁，共 1 頁
[email protected]
[email protected]; [email protected]; [email protected]; [email protected]
Re: Question Hwk 247S (bis)
Mon, 4 Aug 2008 3:19 pm
Hello Guillaume,
The pension fund manager is trying to lock in an adequate return by longing the interest rate futures
certificate at 92.50 each.
a.
The fund manager should use the money to buy the CME futures
contract at 92.50 to lock in the 7.50% interest rate. Otherwise, he can
only obtain a deposit rate of 7.375%.
b.
In this case, the hedge caused a net gain and the locked-in deposit rate
of 7.5% is higher than the Eurodollar deposit rate of 6.375% at maturity.
c.
In this case, the hedge caused a net loss and the locked-in deposit rate of 7.5% is lower than the Eurodollar
deposit rate of 8.375% at maturity.
Regards,
Ted
0804 2008
-----Original Message----From: Guillaume Hélie <[email protected]>
To: [email protected]; [email protected]; [email protected]
Sent: Mon, 4 Aug 2008 9:29 am
Subject: Question Hwk 247S (bis)
Hi again,
In Chapter 11 - Exercise 4, is it correct that the best hedging (long IR future) leads to an
interest rate of 7.5% - the LIBOR/LIBID spread in 3 months ?
In this case, there is no minimum interest rate that can be locked, right ? (cf. a)
Thanks
Envoyé avec Yahoo! Mail. Une boite mail plus intelligente.
It's time to go back to school! Get the latest trends and gadgets that make the grade on AOL Shopping.
http://webmail.aol.com/38159/aim/en-us/Mail/PrintMessage.aspx
2008/8/4