Calculate the yield

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Question - Angel sold a futures contract on a 90-day bank bill that expires in 100 days' time for the futures price of 97.55. To ensure that she had a 90-day bank bill to deliver at expiry of the futures contract, Angel purchased a 190-day bank bill at the same time. The bank bill Angel bought had a face value of $1 million and was priced to yield 2.30 per cent per annum to maturity. Two days after Angel established these positions, the Reserve Bank unexpectedly cut the cash rate target and market interest rates fell to 1.00% p.a.

If Angel follows through with the plan to deliver the bank bill in satisfaction of the futures contract:

i) Identify the amount and timing of his net cash payments and receipts and

ii) Calculate the yield (simple interest, in percent per annum) Angel will achieve from his investment in the bank bill.

Reference no: EM133093507

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