A trader buys a 90-day Eurodollar futures contract at 95.25.The next day, interest rates fall 4.5%.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 $62,500 into her account.
B)The trader would have to deposit an additional $2,500 into her account.
C)The trader would have to deposit an additional $625 into her account.
D)The trader could withdraw $2,500 from her margin account.
E)The trader could withdraw $625 from her margin account.

Question

Quizplus · Accepted Answer

When interest rates fall, the price of the futures contract increases, allowing the trader to withdraw the profit, which is $625 in this case.

A Trader Buys a 90-Day Eurodollar Futures Contract at 95