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An investor wants to lock in the interest rate for a three-month period beginning September...

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Finance

  1. An investor wants to lock in the interest rate for a three-month period beginning September 18, 2021 on a principal of $100 million. The September 2021 Eurodollar futures quote is 97.25. Suppose that on September 18, 2021, the three-month Eurodollar rate turns out to be 2.5%. If this investor could use forward rate agreements to lock in the interest rate. Compare and contrast forward rate agreements and Eurodollar futures in terms of interest rate risk hedging.

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