An investor wants to lock in interest rate for a 3-month, Ask an Expert

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An investor wants to lock in interest rate for a 3-month period starting from 09/19/2012 on a principle of 100 million dollars. The September Euro-dollar futures quote now is 96, indicating that this investorcan lock in 100-96 = 4 or 4% a year.

IF the actual 3-month interest, which is used for settlement on09/19/2012 is 2.6%, show detailed calculations for why this investor is able to lock in 4%.

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Financial Management, Finance

Category:- Financial Management
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