Explanation:
The price of the Eurodollar futures contract is given by:
Eurodollar futures contract price = 10,000(100 − 0.25 × (100 − Quoted price))
= 1,000,000 − 2,500 × (100 − Quoted price)
The futures rate for the three-month period beginning in the first month (September) is
100 − 95.2 = 4.8%
So in our case,
Eurodollar futures contract price = 10,000(100 − 0.25 × (100 − 95.2)) = $988,000
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Q.29 Suppose that a September Eurodollar futures contract is quoted as $95.2. What is the price of the contract?
Note that the size of one Eurodollar contract is $1 million and the change of one basis point is $25.
A
$988,000
B
$987,500
C
$952,000
D
$480,000