When the LIBOR yield drops,the:
A) value of a eurodollar futures contract drops.
B) value of a eurodollar futures contract remains unchanged.
C) value of a eurodollar futures contract increases.
D) value of a eurodollar futures contract might drop or increase depending on the circumstances.

Question

Quizplus · Accepted Answer

The value of a eurodollar futures contract is inversely related to the LIBOR yield. When the LIBOR yield drops, the value of a eurodollar futures contract increases. This is because a lower LIBOR yield suggests decreasing interest rates, which would increase the demand for eurodollar futures contracts as investors seek to lock in current rates before they decrease further.

When the LIBOR Yield Drops,the