Multiple Choice
Use the following information to answer questions 22 through 24.On October 1,the one-month LIBOR rate is 4.50 percent and the two month LIBOR rate is 5.00 percent.The November Fed funds futures is quoted at 94.50.The contract size is $5,000,000.
-All of the following are limitations to Fed funds futures arbitrage,except
A) Fed funds rates are determined by Federal Reserve Bank policy
B) basis risk between Fed funds and LIBOR
C) repo rate is variable for the trading horizon
D) settlement is based on average in delivery month
E) transaction costs
Correct Answer:
Verified
Correct Answer:
Verified
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