A bank wants to lock in the 3-month interest rate starting on June 20, 2017. Cur

Question

A bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.51 and 9/2017 Eurodollar futures price is 97.55. What is the lock in 3-month interest rate between 6/2017 and 9/2017? (margin of error: +/- 0.01%) A bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.51 and 9/2017 Eurodollar futures price is 97.55. What is the lock in 3-month interest rate between 6/2017 and 9/2017? (margin of error: +/- 0.01%)

Explanation / Answer

Euro Dollar Future Price on 6/2017 = 94.51

Euro Dollar Future Price on 9/2017 = 97.55

Interest in 3- Month Period = 3.04 Euro Dollar

3- Month Lock in Interest Rate = 3.04 / 94.51 * 100 * 3/12

                                                 = 0.8041%

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