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

question 39

Multiple Choice

A trader buys a 90-day Eurodollar futures contract at 95.25. The next day, interest rates fall to 4.5%. 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 $5,000 into her account.
• B) The trader would have to deposit an additional $2,500 into her account.
• C) The trader would have to deposit an additional $625 into her account.
• D) The trader could withdraw $2,500 from her margin account.
• E) The trader could withdraw $625 from her margin account.

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Definitions:

Debt Ratio

A financial ratio that measures the proportion of a company’s total debt to its total assets, indicating the degree of leverage and financial risk.

Days' Sales in Inventory

A financial metric indicating the average number of days it takes for a company to turn its inventory into sales.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Total Asset Turnover

A financial ratio that measures a company's efficiency in using its assets to generate sales or revenue.