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  3. a 45-day treasury bill has a discount rate of 6.50

A 45-day Treasury bill has a discount rate of 6.50%. A 235-day Treasury bill has...

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Accounting

A 45-day Treasury bill has a discount rate of 6.50%. A 235-day Treasury bill has a discount rate of 6.95%.

(a) What should be the price of a futures contract that expires in 45 days? Assume $1000 par value.

(b) Show that the purchase of a 235-day T-bill, with its price in 45 days hedged by the sale of a 45-day futures contract that calls for the delivery of a 180-day T-bill, is equivalent to purchasing a 45-day T-bill and holding it to maturity

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