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Answer: The long position in a Eurodollar future contract promises to borrow $1,000,000 at maturity and repay this principal three months later
The **exception** is **B**. A Eurodollar futures contract is economically equivalent to an agreement on a 3-month LIBOR deposit. - The **short** side is effectively the **borrower**. - The **long** side is effectively the **lender**. So the long position does **not** promise to borrow $1,000,000; that is the economic role of the **short** position.
Author: Manit Arora
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Question 172.4. Each of the following is TRUE about the Eurodollar futures contract EXCEPT:
A
A Eurodollar is a dollar denominated deposit in a bank that is not located in the United States
B
The long position in a Eurodollar future contract promises to borrow $1,000,000 at maturity and repay this principal three months later
C
The notional value of a single Eurodollar futures contract is $1,000,000 with delivery months of March, June, September and December
D
The short position in a Eurodollar futures contract gains when the LIBOR interest rate increases
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