Pierres uncle recently passed away and left him 500,000, which he will receive in three months. He

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Pierre’s uncle recently passed away and left him €500,000, which he will receive in three months. He wants to invest the money in safe, interest-bearing instruments, and he believes French Treasury notes to be his best option. He believes that interest rates will fall over the next few months, so he will have to pay a lot more in three months than he would today for two-year French Treasury notes. He looks into futures and finds a quote of 111.08 for two-year French Treasuries deliverable in three months (contracts  rade in €100,000 units and require an initial margin of €680). What does the quote mean in terms of price, and how many contracts will he need to buy? How much money will he need to buy the contract, and how much will he need to settle the contract?

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Fundamentals Of Investing

ISBN: 9780135175217

14th Edition

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

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