Unformatted text preview: bills had a yield of 1.80% (a spread of +20 basis points), and the September 90-day T-bill futures contract had a yield of 2.30%. You decided to hedge by purchasing the September futures contract, knowing that you would take off the hedge in August and purchase 90-day cash T-bills. Assume that it is now August and the spread between 3-month and 4-month T-bills has changed to -15 basis points, such that 90-day cash T-bills have a yield of 2.50% and 120-day cash T-bills (as well as the September futures contract) have a yield of 2.35%. Based on this, determine your effective yield from this hedge. A. 2.60% B. 2.75% * C. 2.45% D. 2.90% E. 2.30% Cash 90-day T-bills = 2.50% Cash 120-day T-bills = 2.35% September contract = 2.35% Futures Value at Sale (2.35%) $994,125 Value at Purchase (2.30%) 994,250 Loss on Transaction - $ 125 90-Day Cash T-Bills...
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- Spring '08
- Forward contract, Ton, 90-day cash T-bills