Question: On June 1, the one-month LIBOR rate is 4.25%, and the two-month LIBOR rate is 5.50%. The 30-day July Fed Funds rate futures contract is

On June 1, the one-month LIBOR rate is 4.25%, and the two-month LIBOR rate is 5.50%. The 30-day July Fed Funds rate futures contract is quoting at 95.10. You think there might be an arbitrage play based upon the likelihood of rising interest rates in the near-term. You will use one $5,000,000 contract.

 

Now, suppose that on July 1, the one-month LIBOR has risen (as you suspected), and it now stands at 6.35%. Rounded to the nearest cent, the present value at July 1 of the two-month loan you made is now $?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

To calculate the present value of the twomonth loan made on July 1 we need to di... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Explain what the term HACCP refers to. Develop your own HACCP plan-from the time you purchase a pound of ground beef until it shows up as a hamburger on your plate.

Q:

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

Q:

Question: Old MathJax webview Old MathJax webview i need ans of these question but the source is alot Old MathJax webviewOld MathJax webview i need ans of these question but the source is alot these...

Q:

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

Q:

On January 1, the one-month LIBOR rate is 4% and the two-month LIBOR rate is 5%. The February fed funds futures is quoted at 94.50. Assume the use of a signle $5,000,000 futures contract. a) What is...

Q:

On January 1, the one-month LIBOR rate is 5% and the two-month LIBOR rate is 6%. The February fed funds futures is quoted at 93.50. Assume the use of a single $5,000,000 futures contract. a What is...

Q:

On April 1, the one-month LIBOR rate is 0.11038%, and the two-month LIBOR rate is 0.14838%. The 30-day May Fed Funds rate futures contract is quoting at 99.90. You think there might be an arbitrage...

Q:

On April 1, the one-month LIBOR rate is 0.11038%, and the two-month LIBOR rate is 0.14838%. The 30-day May Fed Funds rate futures contract is quoting at 99.90. You think there might be an arbitrage...

Q:

On April 1, the one-month LIBOR rate is 0.11038%, and the two-month LIBOR rate is 0.14838%. The 30-day May Fed Funds rate futures contract is quoting at 99.90. You think there might be an arbitrage...

Q:

On April 1, the one-month LIBOR rate is 0.11038%, and the two-month LIBOR rate is 0.14838%. The 30-day May Fed Funds rate futures contract is quoting at 99.90. You think there might be an arbitrage...

Q:

On April 1, the one-month LIBOR rate is 0.11038%, and the two-month LIBOR rate is 0.14838%. The 30-day May Fed Funds rate futures contract is quoting at 99.90. You think there might be an arbitrage...

Q:

Products distributes a single product, a woven basket whose selling price is $15 and whose variable expense is $12 per unit. The companys monthly fixed expense is $4,200. Required: 1. Solve for the...

Q:

A 20.0-g lead bullet leaves a rifle at a temperature of 87.0C and hits a steel plate. If the bullet melts, what is the minimum speed it must have?

Q:

Identify two or more strategic outcomes that you intend to include in your AOR, with an explanation of their relevance to the intended audience.

Q:

Apply Thevenins theorem twice to find V0 in the circuit shown. 2 1 1 -j1C2

Q:

The following Trueblood case is recommended for use with this chapter. The case provides an excellent opportunity for class discussion, group projects, and writing assignments. The case, along with...

Q:

How does your web browser get a file from the Internet? Your computer sends a request for the file to a web server, and the web server sends back a response. For one particular web server, the time...

Q:

How does your web browser get a file from the Internet? Your computer sends a request for the file to a web server, and the web server sends back a response. Let Y = the amount of time (in seconds)...

Q:

A department store mails a customer satisfaction survey to people who make credit card purchases at the store. This month, 45,000 people made credit card purchases. Surveys are mailed to 1000 of...

Q:

The following transactions occurred at Chicken King Restaurant:a . Purchased new fryer equipment with a bank note.b . Paid wages from cash.c . Sales for the month in cash.d . Paid postage for a...

Q:

In recent years, the Securities and Exchange Commission (SEC) has been waging a public campaign against corporate accounting practices that manage or manipulate earnings to meet the expectations of...

Q:

Rylander Corporation owns 35 percent of the voting stock of Waters Corporation. The Investment account on Rylander's books as of January 1, 2014, was $720,000. During 2014, Waters reported the...

Q:

Internal reports on quality at Lakelawn Press Company generated the following information for the School Division for the first three months of the year: Total...

Q:

To examine whether mathematics skills of the average high school graduate in urban areas of the United States have declined over the past 10 years, the average scores on the math section of the SAT...

Q:

A private research corporation conducted an experiment to investigate the toxic effects of three chemicals (I, II, and III) used in the tire-manufacturing industry. In this experiment, three adjacent...

Q:

In a study of the psychosocial changes in individuals who participated in a community-based intervention program, individuals who were clinically identified as hypertensives were randomly assigned to...