a. What is the present value of the futures contract?
b. If the contract settles at 105-8, are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.
c. What is the implied annual interest rate on the futures contract?
d. Calculate the new value of the futures contract if interest rates increase by 1 percentage point annually.
e. Calculate your profit or loss if you sold a futures contract at 105-8 and purchased an offsetting contract when rates increased by 1 percentage point annually.
See attached file for full problem description.
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