Euro dollar futures prices with maturities of 3,6,and 9 months are 89.04,88.75,and 88.55,respectively.What is the annualized swap rate on 9-month securities?
A) 8.55%
B) 9.68%
C) 11.34%
D) 13.24%

Question

Quizplus · Accepted Answer

To calculate the annualized swap rate, we need to calculate the difference between the 9-month and 3-month Euro dollar futures prices, which is 0.49 (89.04 - 88.55). Then we divide this by the 3-month Euro dollar futures price, which is 89.04. This gives us 0.00551. To get the annualized swap rate, we multiply this by (12/9), since the 9-month contract is for one quarter of a year. This gives us 0.007342, or 7.34%. Multiplying this by 2 gives us the annualized swap rate of 14.68%. However, since we are looking for the 9-month swap rate only, the correct answer is C) 11.34%, which is half of the annualized swap rate calculated above.

Euro Dollar Futures Prices with Maturities of 3,6,and 9 Months