Question
The Eurodollar futures contract represents an interest rate on a three-month deposit of $1 million. The notional principal is standardized at $1 million, the interest
The Eurodollar futures contract represents an interest rate on a three-month deposit of $1 million. The notional principal is standardized at $1 million, the interest rate period is three months, and maturities are the March quarterly cycles.
Q) Refer to the following CME Eurodollar futures information for Questions 2.1-2.5 ( There isn't any more information given by the professor)
Maturity | Last | Interest Rate |
Jun' 15 | 99.525 | 0.475% |
Sep' 15 | 99.335 | 0.665% |
Dec' 15 | 99.11 | 0.89% |
2.1) What is the yield or interest rate for the Dec 15 contract?
Your answer: _____________________%
(Keep four decimals)
2.2) What does the yield or interest rate for the Dec 15 contract mean?
a. An annualized interest rate for the period from December 2015 to March 2016.
b. An annualized interest rate for the period from December 2015 to June 2016.
c. An annualized interest rate for the period from December 2015 to September 2016.
d. An annualized interest rate for the period from December 2015 to December 2016.
2.3) If you plan to make a short - term investment of $10 million for a period from June 2015 to September 2015, how do you hedge your exposure using Eurodollar futures?
a. Buy 10 Sep 15 Eurodollar futures contracts.
b. Sell 10 Sep 15 Eurodollar futures contracts.
c. Buy 10 Jun 15 Eurodollar futures contracts.
d. Sell 10 Jun 15 Eurodollar futures contracts.
2.4) If you plan to borrow a short - term loan of $10 million for a period from June 2015 to September 2015, how do you hedge your exposure using Eurodollar futures?
a. Buy 10 Sep 15 Eurodollar futures contracts.
b. Sell 10 Sep 15 Eurodollar futures contracts.
c. Buy 10 Jun 15 Eurodollar futures contracts.
d. Sell 10 Jun 15 Eurodollar futures contracts.
2.5) If you believe that the 3 - month Eurodollar interest rate in December 2015 will be more than 1%, how do you establish a position to bet on your expectation?
a. Buy Dec 15 Eurodollar futures contracts.
b. Sell Dec 15 Eurodollar futures contracts.
c. Buy Sep 15 Eurodollar futures contracts.
d. Sell Sep 15 Eurodollar futures contracts.
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