Suppose a company is going to borrow $10 million for 3 months beginning June 201

Question

Suppose a company is going to borrow $10 million for 3 months beginning June 2016. The company wants to lock in the borrowing rate today. Which action should the company undertake?

Buy 1 June 2016 Eurodollar futures contract

Short 1 June 2016 Eurodollar futures contract

Buy 1 September 2016 Eurodollar futures contract

Short 1 September 2016 Eurodollar futures contract

Buy 10 June 2016 Eurodollar futures contracts

Short 10 June 2016 Eurodollar futures contracts

Buy 10 September 2016 Eurodollar futures contracts

Short 10 September 2016 Eurodollar futures contracts

Currently, the beta of a stock fund is 1.2. Suppose the fund manager wants to reduce the beta of this portfolio. Which is an effective way to achieve such goal?

a.Short stock index futures

b. Long stock index futures

c. Buy more stocks

d. Short Eurodollar futures

In an interest rate swap, the remaining floating cash flows are known.

True or False

a.

Buy 1 June 2016 Eurodollar futures contract

b.

Short 1 June 2016 Eurodollar futures contract

c.

Buy 1 September 2016 Eurodollar futures contract

d.

Short 1 September 2016 Eurodollar futures contract

e.

Buy 10 June 2016 Eurodollar futures contracts

f.

Short 10 June 2016 Eurodollar futures contracts

g.

Buy 10 September 2016 Eurodollar futures contracts

h.

Short 10 September 2016 Eurodollar futures contracts

Explanation / Answer

Buy 1 June 2016 Eurodollar futures contract

Short stock index futures

False

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