burning0spear

Which of the following statements about futures contracts on U.S. exchanges is least likely accurate?

A) Prices of currency futures contracts are quoted as U.S. dollars per unit of the foreign currency.

B) A $100,000 Treasury bond futures contract that settles at 102-16 represents Treasury bonds worth $102,500.

C) If annualized 90-day LIBOR decreases from 3.64% to 3.58%, a long position in a $1 million Eurodollar futures contract loses $150.

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The long position in a Eurodollar contract gains value when LIBOR decreases. Price quotes on Eurodollar futures are calculated as 100 minus annualized 90-day LIBOR in percent. A change in 90-day LIBOR of 0.01% represents a $25 change in value on a $1 million Eurodollar futures contract. If LIBOR decreases from 3.64% to 3.58%, the contract price increases six ticks from 96.36 to 96.42, so the long position gains 6 × $25 = $150.
Treasury bond futures that have a face value of $100,000 are quoted as a percent of face value with fractions measured in 1/32nds. A bond futures quote of 102-16 represents 102 16/32, or 102.5% of $100,000, which is $102,500.
Currency futures contracts are set in units of the foreign currency and stated as USD/unit.

burning0spear

Which is the only type of commodity where trading in forward contracts is larger than trading with future contracts?

A) Foreign currency.

B) Agricultural.

C) Interest rate.

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Trading in foreign currency forwards is far larger than the trading in futures. For example, with international trade, businesses can hedge against adverse currency fluctuations. But each business arrangement is unique, and most require the flexibility of a forward, whose terms are not standardized, that meets their special needs.