What is the markets expectation of the annualized 3-month LIBOR in March 2020?
Assume an investor purchased one SEP 2020 contracts at the price listed above. If the 3-month LIBOR is 0.25% per annum in September 2020, calculate the investors gain/loss.
A MNC will borrow a 90-day floating-rate loan of $3,000,000 in Jun 2020. Construct a hedging strategy with Eurodollar futures for the MNC. Demonstrate that the use of Eurodollar futures would result in a fixed-rate loan regardless the actual LIBOR in June 1. Assume the actual 3-month LIBOR in June is either 1.13% per annum or 0.83% per annum with equal probability.
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