Tim Doyle is a portfolio manager at Best Futures Group, a hedge fund that frequently enters derivative contracts either to hedge the risk of investments it holds or to speculate outside of those investments. Doyle works alongside Diane Kemper, a junior analyst at the hedge fund. They meet to evaluate new investment ideas and to review several of the firms existing investments. Doyle and Kemper discuss the carry arbitrage model and how they can take advantage of mispricing in bond markets. Specifically, they would like to execute an arbitrage transaction on a Eurodollar futures contract in which the underlying Eurodollar bond is expected to make an interest payment in two months. Doyle makes the following statements:

Statement 1: If the Eurodollar futures price is less than the price suggested by the carry arbitrage model, the futures contract should be purchased. Statement 2: Based on the cost of carry model, the futures price would be higher if the underlying Eurodollar bonds upcoming interest payment was expected in five months instead of two.

Which of Doyles statements regarding the Eurodollar futures contract price is correct?

a. Only Statement 1

b. Only Statement 2

c. Both Statement 1 and Statement 2

d. None of the statements