A Eurodollar futures option contract has a strike price of 97 and the Eurodollar interest rate is 2.50%. What is the intrinsic value of the contract if the option is a call?
A) $0
B) $1,250
C) $1,750
D) $2,500

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is calculated as the difference between the market price and the strike price. Here, the Eurodollar interest rate implies a futures price of 97.50 (100 - 2.50). The intrinsic value is (97.50 - 97) * $2,500 = $1,250.

A Eurodollar Futures Option Contract Has a Strike Price of 97