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Describe the interest rate risk

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Problem - Ms. Hunter is a money market manager. In July, she anticipates needing cash in September that she plans to obtain by selling ten $1 million face value T-bills she currently holds. At the time of the anticipated September sale, the T-bills will have a maturity of 91 days. Suppose there is a September T-bill futures contract trading at a discount yield of 6%.

a) Describe the interest rate risk that she is facing. Is it better if interest rates increase or decrease?

b) How could she lock in the selling price on her T-bills?

c) What will be the locked in sale price?

Reference no: EM133031226

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