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Explain what the sale of such a contract implies

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Reference no: EM133128010

You are given the following data on the 3 month Euribor interest rate futures contract. The contract has a notional size of €l million.

Euribor futures contract June 96.0

(i) Explain what the sale of such a contract implies

(ii) If you think the 3 month interest rate in June will be 3% would you buy or sell the contract? Explain your reasoning and the pro?ts you can expect if you are correct.

(iii) Brie?y explain how a Corporate Treasurer who is looking to borrow £2 million of funds for 3 months from June might use the above contract to hedge interest rate risk.

Reference no: EM133128010

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