Question: Suppose the September Eurodollar futures contract has a price of

Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate.
a. What rate can you secure?
b. Will you be long or short the Eurodollar contract?
c. How many contracts will you enter into?
d. Assuming the true 3-month LIBOR iS1%in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)

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  • CreatedAugust 12, 2015
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