A corporate treasurer expects to receive $1 million in the near future.He wishes to invest the amount in 90-day maturity T-bills.To protect the investment from a decline in the short-term rates,the investor would most likely:

Question

Quizplus · Accepted Answer

To protect the investment from a decline in short-term rates, the treasurer would most likely buy futures contracts written on T-bills as they would enable him to lock in the current interest rate for a future period. Selling futures contracts would expose the investor to the risk of rising rates. Futures contracts for T-bonds or Eurodollars are not suitable for protecting investments in T-bills.

A Corporate Treasurer Expects to Receive $1 Million in the near Future.He