A Trader Buys a 90-Day Eurodollar Futures Contract at 95

question 26

Multiple Choice

A trader buys a 90-day Eurodollar futures contract at 95.25.The next day, interest rates rise 5.25%.Which of the following is true? Assume that the initial and maintenance margins are $5,000.

• A)The trader would have to deposit an additional $62,500 into her account.
• B)The trader would have to deposit an additional $1,500 into her account.
• C)The trader would have to deposit an additional $625 into her account.
• D)The trader could withdraw $1,250 from her margin account.
• E)The trader could withdraw $625 from her margin account.

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Definitions:

Nonexcludability

The inability to keep nonpayers (free riders) from obtaining benefits from a certain good; a characteristic of a public good.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are available to all members of society and one person's consumption does not reduce availability for others.

Public Good

A good or service offered to every member of a society for free, supplied by either government entities or private individuals or groups, without seeking financial gain.

Collective Willingness

The aggregate propensity of a group to invest in goods, services, or actions that benefit the community or society as a whole.