S3 7.3

Question 1

Where are Treasury Bill traded?

Answer 1

CBOT

Question 2

What is the face value of a T-Bill contract?

Answer 2

1M

Question 3

What does 1 Basis Point equal to?

Answer 3

1 / 100th of 1% = 0.01 %/ 100 = 0.0001%

Question 4

How much is a 12-month T-Bill Basis point?

Answer 4

$100 (1’000,000 x 0.0001) or 1/100th of 1% of 1M

Question 5

If one basis point for a 12-mth T-Bill is $100, how much is 1 Basis Point for a 3-month T-Bill?

Answer 5

$25 ($100 / 4)

Question 6

Does the Federal Reserve Bank regulate T-Bill futures?

Answer 6

No - the CFTC does

Question 7

What is the face value of 1 GNMA contract?

Answer 7

$100,000

Question 8

How many GNMA contracts would be needed to hedge 1 x 12-Month T-Bill contract?

Answer 8

10 (1M / 100,000)

Question 9

What is the term for matching Number of Contracts needed to hedge a futures position?

Answer 9

Weighting

Question 10

What is the FOMC?

Answer 10

Federal Open Market Committee (part of the Fed Reserve Bank)

Question 11

What exerts the greatest influence on T-Bill interest rates and fututres?

Answer 11

FOMC operations

Question 12

How do long-term and short-term bond maturities correlate to Interest rates?

Answer 12

Long-term maturities react the greatest, but shoirt-term maturities react the quickest

Question 13

How are GNMA contracts valued (units)?

Answer 13

In 32nds (1 BP = 1% of 100,000 = $1000)

Question 14

What is one fraction of a point (32nd) for GNMA’s?

Answer 14

$31.25 ($1000 / 32)

Question 15

What are the T-Bill Delivery months?

Answer 15

March (3), June (6), September (9) and December (12)

Question 16

What are 3 examples of long-term maturities?

Answer 16

1) AAA Corporate Bonds
2) Mortgages
3) Long-term T-Bills

Question 17

Is a Eurodollar = Euro?

Answer 17

No - Eurodollars are U.S. deposits in foreign banks

Question 18

What is LIBOR?

Answer 18

London Interbank Offered Rate

Question 19

What are Eurodollar futures pegged to?

Answer 19

LIBOR

Question 20

What arfe Eurodolar futures used for?

Answer 20

To lock in interest rates on for funds to be borrowed in the future

Question 21

What is the undrlying assegt for Eurodollar futures?

Answer 21

Time Deposits (CDs)

Question 22

What is the face2 value of 1 x Eurodollar contract?

Answer 22

$1’000,000

Question 23

How much is 1 Basis Point for a Eurodollar contract?

Answer 23

$25 (0.0025% of 1M)

Question 24

How much is 1 Basis Point for LIBOR?

Answer 24

$25

Question 25

What is the face value of a contract (or trading unit) in Swiss Francs?

Answer 25

$125,000 Swiss Francs

Question 26

What is the face value of 1 x SPX futures contract?

Answer 26

$250 x Index value