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:

Capital Stock

The total amount of common and preferred shares that a company is authorized to issue, representing the equity ownership of the company.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits, and distributed proportionally to the amount of shares owned.

Financing Activity

Transactions with lenders or investors that involve borrowing funds, repaying loans, obtaining equity capital, and paying dividends.

Subsequent Events

Events that occur after the balance sheet date but before financial statements are issued or available to be issued.