Financial Risk Manager Part 1

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Explanation:

The futures quote of 96.00 implies a 3-month Eurodollar rate of 4.00%.

To extend the zero curve from 300 days to 390 days, we combine:

P(0,300)=e^{-0.03\cdot 300/365}

A 4.00% quarterly-compounded rate over 90 days implies a growth factor of:

1+\frac{0.04}{4}=1.01

So:

P(0,390)=\frac{P(0,300)}{1.01}

e^{-z_{390}\cdot 390/365}=\frac{e^{-0.03\cdot 300/365}}{1.01}

Taking logs:

z_{390}=\frac{0.03\cdot 300/365+\ln(1.01)}{390/365} \approx 3.239\%

So the correct answer is B. 3.239%.

Explanation:

The futures quote of 96.00 implies a 3-month Eurodollar rate of 4.00%.

To extend the zero curve from 300 days to 390 days, we combine:

P(0,300)=e^{-0.03\cdot 300/365}

A 4.00% quarterly-compounded rate over 90 days implies a growth factor of:

1+\frac{0.04}{4}=1.01

So:

P(0,390)=\frac{P(0,300)}{1.01}

e^{-z_{390}\cdot 390/365}=\frac{e^{-0.03\cdot 300/365}}{1.01}

Taking logs:

z_{390}=\frac{0.03\cdot 300/365+\ln(1.01)}{390/365} \approx 3.239\%

So the correct answer is B. 3.239%.

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MManit

Last updated: April 18, 2026 at 11:32

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