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Graham Investments Must Pay Floating Rate Interest 6 Months from Now

Question 24

Multiple Choice

Graham Investments must pay floating rate interest 6 months from now. The firm can lock in the rate by buying an interest rate futures contract. Interest rate futures for 6 months from today are currently settled at 95.03 for a yield of 4.97% per annum. If the floating interest rate 6 months from now is 6%, how much did Graham gain or lose?


A) Loss; 1.03%
B) Loss; 2.06%
C) Gain; 1.03%
D) Gain; 2.06%

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