What is the effective interest earned by the company

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Question 1: In February, a company wants to lock in the interest rate that will be earned for three months on a $9 million deposit to be made after seven months in September. The company decides to trade in Eurodollar futures and the September Eurodollar futures price is 98.50. Assume that in September the company closes out its position in the futures market when the LIBOR is 2.0% per annum and the futures price is 98.00. Assuming that the correct number of contracts were traded, what is the effective interest earned (in dollars) by the company on its deposit after taking into account the gain or loss in the futures market?

a. 30,750
b. 31,750
c. 32,750
d. 33,750
e. None of the above

Reference no: EM132873474

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