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QUESTION - An investor enters into a March Eurodollar futures contract at a quoted price (Q) of 96.5. The investor's interest rate exposure is for $10 000 000 and he enters into a long contract. He closes out the March Eurodollar futures contract at a quoted price (Q) of 97.8.
Required -
1. What interest rate can the company lock in by using the Eurodollar futures contract?
2. How many contracts do the investor enter into?
3. When entering into a long Eurodollar futures contract explain what the investor's interest rate exposure is and the reason for entering into this contract.
4. Calculate the investor's profit or loss when closing out the March Eurodollar futures contract.
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