The Time-To-Maturity of a Eurodollar Futures Contract Is 4 Years

Multiple Choice

The time-to-maturity of a Eurodollar futures contract is 4 years and the time-to-maturity of the rate underlying the futures contract is 4.25 years.The standard deviation of the change in the short term interest rate, = 0.011.What does the model in the text estimate as the difference between the futures and the forward interest rate?

A) 0.105%
B) 0.103%
C) 0.098%
D) 0.093%