Suppose that the current 90-day London interbank offer rate is 11% all rates are stated on an annualized basis.If next period's LIBOR is 10.5%,then a Eurodollar rate priced at LIBOR plus 1% will cost
A)12% this period and 11.5% next period
B)11% this period and 10.5% next period
C)12% this period and 12% next period
D)11% this period and 11% next period

Question

Quizplus · Accepted Answer

The Eurodollar rate is calculated by adding the specified percentage (in this case, 1%) to the LIBOR rate. Therefore, for this period with a LIBOR of 11%, the Eurodollar rate would be 12% (11% + 1%). For the next period, with a LIBOR of 10.5%, the Eurodollar rate would be 11.5% (10.5% + 1%).

Suppose That the Current 90-Day London Interbank Offer Rate Is