Question

You were just notified that you will receive $100,000 in 2 months from the estate of a deceased relative. You want to invest this money in safe, interest-bearing instruments, so you decide to purchase 5-year Treasury notes. You believe, however, that interest rates are headed down, and you will have to pay a lot more in 2 months than you would today for 5-year Treasury notes. You decide to look into futures and find a quote of 111–08 for 5-year Treasuries deliver-able in 2 months (contracts trade in $100,000 units). What does the quote mean in terms of price, and how many contracts will you need to buy? How much money will you need to buy the contract, and how much will you need to settle the contract?


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  • CreatedApril 28, 2015
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