3 In February 2021, a company wants to lock in the interest rate that will have to be paid for three months on a $18 million borrowing to be made in September 2021. The company decides to trade in Eurodollar futures and the September 2021 Eurodollar futures price is 96.72. In September 2021, the company closes out its position in the futures market when the 3-month LIBOR is 4.14% per annum and the Eurodollar futures price is 95.86. What is the profit or loss of the company in the futures market? a. Profit of $38,700 b. Loss of $38,700 c. Profit of $41,900 d. Loss of $41,900 e .None of the above

3 In February 2021, a company wants to lock in the interest rate that will have to be paid for three months on a $18 million borrowing to be made in September 2021. The company decides to trade in Eurodollar futures and the September 2021 Eurodollar futures price is 96.72. In September 2021, the company closes out its position in the futures market when the 3-month LIBOR is 4.14% per annum and the Eurodollar futures price is 95.86. What is the profit or loss of the company in the futures market? a. Profit of $38,700 b. Loss of $38,700 c. Profit of $41,900 d. Loss of $41,900 e .None of the above

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 37QA

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

In February 2021, a company wants to lock in the interest rate that will have to be paid for three months on a $18 million borrowing to be made in September 2021. The company decides to trade in Eurodollar futures and the September 2021 Eurodollar futures price is 96.72. In September 2021, the company closes out its position in the futures market when the 3-month LIBOR is 4.14% per annum and the Eurodollar futures price is 95.86. What is the profit or loss of the company in the futures market?

Profit of $38,700

Loss of $38,700

Profit of $41,900

Loss of $41,900

.None of the above

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