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Explanation:
A drop in the Eurodollar futures price from 98.00 to 97.20 means the implied LIBOR rate increased by 0.80% = 80 bps.
For a Eurodollar futures contract:
$2,500$2,000Since the investor is long, the price decline produces a loss of $2,000.
Question 172.3. A Eurodollar futures price changes from 98.00 to 97.20. What is the gain/loss to an investor who is LONG one contract?
A
LIBOR decreased by 80 basis point for a loss (to the long position) of $2,000
B
LIBOR increased by 80 basis point for a loss (to the long position) of $2,000
C
LIBOR decreased by 80 basis point for a gain (to the long position) of $2,000
D
LIBOR increased by 80 basis point for a gain (to the long position) of $2,000
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