Given: (1) 121-day spot T-bill trading 98. 318 to yield (5.25 %); (2) 30-day risk-free rate of

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Given: (1) 121-day spot T-bill trading 98.

318 to yield $5.25 \%$; (2) 30-day risk-free rate of $5.15 \%$; (3) a T-bill futures contract with an expiration of $T=30$ days.

a. What is the equilibrium T-bill futures price and its implied futures YTM (annualized)?

b. Explain what a money market manager planning to invest funds for 30 days should do if the price on the T-bill futures were trading at 98.8. What rate would the manager earn?

c. Explain the arbitrage a money market manager could execute if she were holding 121-day T-bills and the T-bill futures were trading at 98 .

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Derivatives Markets And Analysis

ISBN: 9781118202692

1st Edition

Authors: R. Stafford Johnson

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Question Posted: Apr 26, 2024 05:00 AM

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Given: (1) 121-day spot T-bill trading 98. 318 to yield (5.25 %); (2) 30-day risk-free rate of

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Derivatives Markets And Analysis

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