Li Ping Sledges has today invested in a 180-day bank bill with a face value of \$5 million, priced to yield 3.25 per cent per annum. Simultaneously
Question

# Li Ping Sledges has today invested in a 180-day bank bill with a face

value of \$5 million, priced to yield 3.25 per cent per annum. Simultaneously she has sold five futures contracts on a 90-day bank bill with a face value of \$1 million. The futures contracts will expire in 90 days' time from today. The quoted futures price is 96.65. Li Ping intends to settle the contract by delivery. Ignoring any effects from the mark-to-market rule, what yield will Li Ping achieve on her investment? What does this imply about today's 90-day bank yield? Show all calculations

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