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

question 15

Multiple Choice

A trader buys a 90-day Eurodollar futures contract at 95.25. The next day, interest rates rise to 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 $5,000 into her account.
• B) The trader would have to deposit an additional $1,250 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:

Deferred Annuity

An insurance product that provides future payments to the holder, starting at a pre-specified date, often used as a long-term retirement savings vehicle.

Ordinary Annuity

A series of equal payments made at regular intervals, with interest compounding at the end of each period.

Deferred Annuity

A financial product offered by insurance companies that postpones the disbursement of income, periodic payments, or a single large payment until chosen by the investor.

Ordinary Annuity

An investment product that pays out fixed payments to an individual at regular intervals for a specified period of time, typically used for retirement savings.