(a) Assuming an upward sloping yield curve, explain why the swap rate curve is less than the

Eurodollar curve for a given maturity.

(b) State an alternative instrument to a Eurodollar future that can be used to hedge interest

rate risk, and also state the two different settlement options for this instrument.

(c) Suppose a fund owns stocks in a foreign country. State the two sources of fluctuation in

fund value.

(d) The current exchange rate is $1.5 Canadian per one Euro. The Canadian risk free rate is

5%, and the Euro risk free rate is 1% (compounded continuously). Calculate both the

no arbitrage forward price and the prepaid forward price in Canadian dollars for a one

year forward contract on the CAD-EUR exchange rate