Reference no: EM133005938

Question 1 - Mandy James has today invested in a 180-day bank bill with a face value of $1 million, priced to yield 6.3 per cent per annum. Simultaneously she has sold a futures contract on a 90-day bank bill with a face value of $1 million. The futures contract will expire in 90 days' time from today. The futures price is 93.55. Mandy intends to settle the futures contract by delivery. Ignoring any effects from the mark-to-market rule, what is the yield (simple interest, in per cent per annum) Mandy will achieve on her investment?

a) 4.10%

b) 3.12%

c) 5.08%

d) 6.05%

e) None of the above answers is correct.

Question 2 - On 4 March 2020, the quoted price of the June 2020 10-year bond futures contract was 97.2850. Manuela Grossman believed that interest rates would decrease over the next month and she entered into five 10-year bond futures contracts in a position consistent with that view. On 11 March 2020, she closed out her position at a quoted price of 97.3425. Ignoring transaction costs, how much has Manuela made (or lost)?

a) $583.75.

b) -$2918.73.

c) $2918.73.

d) -$583.75.

e) None of the above answers is correct.