_________ future is a cash-settled futures contract for a three-month $1,000,000 eurodollar deposit that pays LIBOR.
A) forward
B) eurodollar
C) forward rate agreement
D) currency swap

Question

Quizplus · Accepted Answer

The question describes a futures contract that pays LIBOR on a $1,000,000 eurodollar deposit. Therefore, the correct answer is the eurodollar futures contract. A forward contract (choice A) is a similar financial agreement but is customized and typically traded over-the-counter, whereas a futures contract is standardized and trades on an exchange. A forward rate agreement (choice C) is a cash-settled agreement between two parties, which is based on a future interest rate. Finally, a currency swap (choice D) is an agreement in which two parties exchange different currencies for an agreed-upon time period.

_________ Future Is a Cash-Settled Futures Contract for a Three-Month