Answer the following questions in regard to a Treasury futures contract expiring in 6 months.

Reference asset market price:	$102.00	per 100 face amount
Reference asset coupon Rate:	2%	annual amount, payable every 6 months
6-month financing rate:	1%	annual rate, payable every 6 months

Q1 (3pts) - What is the fair value of the futures contract?

Q2 (3pts) - Assuming the futures contract is currently trading at 99.25, should you open a long or a short contract to earn an arbitrage profit?

Q3 (3pts) - Using the standard holding period return formula, calculate the total return of your trade assuming you open a contract at 99.25 and close the position at the fair value calculated in Q1. You earn no income.

Group of answer choices

Q1

[ Choose ] 2.31% 97.51 101.49 2.30% Neither short nor long - futures price is fair Short 97.49 2.29% 101.51 2.28% 2.32% Long

Q2

Q3