Use the Following Information to Answer Questions 22 Through 24

question 48

Multiple Choice

Use the following information to answer questions 22 through 24.On October 1,the one-month LIBOR rate is 4.50 percent and the two month LIBOR rate is 5.00 percent.The November Fed funds futures is quoted at 94.50.The contract size is $5,000,000.
-Compute the dollar profit or loss from borrowing the present value of $5,000,000 at one month LIBOR and lending the same amount at two month LIBOR while simultaneously selling one November Fed funds futures contract.Assume that rates on November 1 were 7 percent,there is no basis risk,and the position is unwound on November 1.Select the closest answer.

• A)-$3,150
• B)$0
• C)$3,150
• D)$940
• E)-$940

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