Eurodollar futures contracts are traded on the CME with a size of $1 million. The initial margin
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a. What is the forward interest rate implicit in the Eurodollar futures quotation (93.280%) on April 1? Why is it higher than the current three-month Eurodollar rate (6.25%)?
b. What position would you take in futures contracts to lock in a three-month borrowing rate for June 17?
c. On June 17, the Eurodollar futures contract quotes at 91 percent, while the current Eurodollar rate in London is 9 percent. You unwind your position on that date. Describe the cash flows involved.
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