Question

**On the CME
Group website, a June Eurodollar Futures contract gives a price of
98.10% (i.e., a discount yield of 1.90%) for a $1 million**,
90 day Eurodollar Futures contract.

**What is the contract price for the Eurodollar Futures Contract in dollars?**

Eurodollar Futures Price in Dollars
**______________**

**What type of
Eurodollar futures contract should be purchased (long or short)?
Explain why.**

Long or
Short __**_____**
Why?______________**_______**__

Answer #1

Discount Yeild - 1.9%

Settlement Value of Futrue Contract - $1,000,000.00

Calculation of current price of Eurodollar future contract = Value of contract * (1 - discount yield)

= $1000000*98.10%

=$981,000

Hence, **Eurodollar Futures Price in Dollars =
$981,100**

Now, Type of future contract that should be purchase is
**Long Position**

**Because**

the future contract is at a discount hence

**If we take Long Position**

Buy now at $981000 and sell at settlement date at $1000000

Or pay now = $ 981000

Receive after 90 days= $1000000

Net Profit = $19000

**If we take short Position**

Sell now at 981000 and buy at settlement date at $1000000

Or Receive now = 981000

pay after 90 days =1000000

Net Loss = $19000

Hence we should take long position Here.

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