A treasurer will receive a $12,250,000 cash infusion in mid-June 2022. The Treasurer is worried that short-term

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A treasurer will receive a $12,250,000 cash infusion in mid-June 2022. The Treasurer is worried that short-term interest rates may fall over the medium term and wants to lock in a deposit rate today, effective in June 2022. CME's Eurodollar (Symbol ED) contract is an efficient hedging contract.

a. Using CME's Eurodollar complex, suggest a specific trade that will meet the Treasurer's objective.

b. If deposit rates are 139 basis points in June 2022, how much profit or loss did the Treasurer earn on the hedge, assuming your suggested trade in part a) was executed?

c. Briefly describe the settlement procedure for CME's Eurodollar contact.

Posted Date: May 15, 2024 11:11 AM

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A treasurer will receive a $12,250,000 cash infusion in mid-June 2022. The Treasurer is worried that short-term

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