The spot discount rates for two T-bills, 80-day T-bill, and 170-day T-bill are given below. A) Based
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Question:
The spot discount rates for two T-bills, 80-day T-bill, and 170-day T-bill are given below.
A) Based on the two T-bills' discount rates, what should be the quoted equilibrium price of an 80-day T-bill futures contract? Assume $1,000,000 face value. Keep in mind the quoted price is 100 - (discount rate). What should be the dollar amount implied by the futures quoted price (the amount to pay or to be paid at settlement or the delivery price of a T-bill futures contract)?
B) You took 10 long T-bill futures contracts for delivery in 80 days. It is now 20 days later since you took the long futures position and the T-bill futures for delivery in 60 days is quoted at 95.50. Calculate your gains(losses) on your position.
Spot discount rates | |
80-day T-bill | 6.00% |
170-day T-bill | 6.25% |
Face Value | $1,000,000 |
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