To hedge interest rate risk associated with its Eurodollar deposits, a company should buy Eurodollar futures...
To hedge interest rate risk associated with its Eurodollar deposits, a company should buy Eurodollar futures contracts.
true or false?
Homework Answers
True
Eurodollar deposits are US dollar deposits in a bank outside the US.
A company which has Eurodollar deposits needs to hedge against a decline in interest rates because if interest rates decline, the company's interest income would decline.
To hedge against a decline in interest rates, a company should buy Eurodollar futures contracts because if interest rates decline, the price of the Eurodollar futures contract would rise, thus offsetting the loss in interest income due to the decline in interest rates
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To hedge interest rate risk associated with its Eurodollar
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If interest rates increases, the Eurodollar futures price also increases. True False
If interest rates increases, the Eurodollar futures price also increases. True False
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You bought one Eurodollar futures contract, if interest rate declines, you will have a gain loss
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