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Past exam question April 2012, Q2

Discussion in 'SP5' started by Benjamin, Apr 6, 2018.

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  1. Benjamin

    Benjamin Member

    Hi,

    This one is along the same vein as a previous question around terminology used to express rates.

    Question says a futures quote is for a three-month contract and is expressed with quarterly compounding...the price is 96.

    The answer says therefore, the interest rate is 4% convertible quarterly.

    I can see that 100 nominal - 96 = 4, divide that by 4 to 1% per quarter. Though how do I know from this wording that the 96 corresponds to 1yr
     
    Benjamin, Apr 6, 2018
    #1
  2. Simon James

    Simon James ActEd Tutor Staff Member

    This assumes you are aware that Eurodollar contracts are quoted in this way (see Chapter 11 p15)
     
    Simon James, Apr 6, 2018
    #2
    Benjamin likes this.
  3. Benjamin

    Benjamin Member

    Understood - thank you!
     
    Benjamin, Apr 8, 2018
    #3

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