Question
On June 1, the one-month LIBOR rate is 4.25%, and the two-month LIBOR rate is 5.50%. The 30-day July Fed Funds rate futures contract is
On June 1, the one-month LIBOR rate is 4.25%, and the two-month LIBOR rate is 5.50%. The 30-day July Fed Funds rate futures contract is quoting at 95.10. You think there might be an arbitrage play based upon the likelihood of rising interest rates in the near-term. You will use one $5,000,000 contract.
Now, suppose that on July 1, the one-month LIBOR has risen (as you suspected), and it now stands at 6.35%. Rounded to the nearest cent, the present value at July 1 of the two-month loan you made is now $?
Step by Step Solution
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Step: 1
To calculate the present value of the twomonth loan made on July 1 we need to di...
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Financial and Managerial Accounting
Authors: Belverd E. Needles, Marian Powers, Susan V. Crosson
10th edition
978-1285441979, 1285441974, 978-1133626992, 1133626998, 978-1133940593
