Question: QUESTION 6 : (10 Marks) Calculate the 90 day implied forward dy rates if 70 day, 160 day, 250 day T.Bills have a dy of

QUESTION 6: (10 Marks)

Calculate the 90 day implied forward dy rates if 70 day, 160 day, 250 day T.Bills have a dy of 5%, 7% and 8% respectively. If these implied rates are the traded forward market rates and you expect the yield curve to become steeper, what time spread position would you place today? Explain your profit/loss if you subsequently reverse these positions at an IMM Index of 93 for the near (due in 70 days) contract and 90.5 for the far (due in 160 days) contract. What is the equilibrium dy for the 180 day forward rate due in 70 days?

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