On the basis of liquidity,the best futures contract for hedging short-term interest rates is
A)Treasury bills
B)the prime rate
C)commercial paper
D)Eurodollars
E)none of the above

Question

Quizplus · Accepted Answer

Eurodollars are offshore U.S. dollar-denominated time deposits that are highly liquid and widely traded in the futures market, making them an ideal choice for hedging short-term interest rates. The futures contract based on Eurodollars is also one of the most actively traded futures contracts in the world. Treasury bills, commercial paper, and the prime rate may also be used for short-term interest rate hedging, but they are not as liquid as Eurodollars.

On the Basis of Liquidity,the Best Futures Contract for Hedging