
Interest Rate Futures 181
In one month, assume that the rate increases to 8% and the futures price is INR 93.21.
Gain from futures = (100 – 93.21) × 25 × 2,000 = INR 339,500
Loss on home loan = (60,663 – 58,054) × 120 months = INR 313,080
Net gain = INR 339,500 – INR 313,080 = INR 26,420
is shows that Rita has converted the oating-rate loan into a xed-rate loan.
E X A M P L E 8 . 1 0
Kumar has taken a home loan from a bank on a xed-rate basis. e bank is charging 10%, and the
amount of loan is INR 5,000,000 for a period of 10 years with expected monthly payment of INR 66,075.
Kumar is concerned that the interest rate may decrease and he ...