Use the following information to answer questions 22 through 24. On October 1, the one-month LIBOR rate is 4.50 percent and the two month LIBOR rate is 5.00 percent. The November Fed funds futures is quoted at 94.50. The contract size is $5,000,000.

The dollar value of a one basis point rise in the Fed funds futures price is

a. -$25.00

b. $41.67

c. $5,000

d. $25.00

e. none of the above

Compute the dollar profit or loss from borrowing the present value of $5,000,000 at one month LIBOR and lending the same amount at two month LIBOR while simultaneously selling one November Fed funds futures contract. Assume that rates on November 1 were 7 percent, there is no basis risk, and the position is unwound on November 1. Select the closest answer.

a. -$3,150

b. $0

c. $3,150

d. $940

e. -$940