Two Months from Today You Plan to Borrow $3 Million

question 16

Multiple Choice

Two months from today you plan to borrow $3 million for 6 months at LIBOR.You hedge your interest rate risk with a euro dollar futures contract priced at 93.6.If settled in arrears,what is your payment if the 6-month LIBOR is 2.5% in two months?

• A) $8,500
• B) $10,500
• C) $13,500
• D) $15,500

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Customer Profitability

An analysis to determine the financial contribution brought by a customer through their purchases minus the costs of servicing them.

Product Costs

The costs directly attributable to the creation of products, including materials, labor, and manufacturing overhead.

Distribution

The process of making a product or service available for the consumer or business user that needs it.