Assume that the following Treasury yield curve is in existence. Time in Years Time in Coupon YTM Periods Rate Price Theoretical Semi- Annual Spot Rate Implied Theoretical Semi- Annual Spot annual Rate forward rate Implied Annual Forward Rates 0.5 1 0.00% 4.50% $97.79951 2.25% 4.50% 2.55022% 5.1004401% 1 2 0.00% 4.80% $95.36743 2.40% 4.80% 4.80000% 6.3514618% Show that the actual futures price (BEY of 4.9%) is incorrect using a zero-cost investment strategy involving the spot market and the futures market. (Of course, if the futures price is correct, this zero cost strategy will also have zero profit.) Show the actual dollar cash flows at time and at the expiration of the futures contract. Time 0: Borrow at the [Select] +$ [Select] Buy the Select] -$ [Select) Net cash flow $ Select [ Select ] the six-month futures contract At expiration in 6 mo: Pay back the loan plus interest - $ [Select] [Select] the bond we own to fulfill the futures contract +$ Select] Net cash flow +$ [ Select ] Assume that the following Treasury yield curve is in existence. Time in Years Time in Coupon YTM Periods Rate Price Theoretical Semi- Annual Spot Rate Implied Theoretical Semi- Annual Spot annual Rate forward rate Implied Annual Forward Rates 0.5 1 0.00% 4.50% $97.79951 2.25% 4.50% 2.55022% 5.1004401% 1 2 0.00% 4.80% $95.36743 2.40% 4.80% 4.80000% 6.3514618% Show that the actual futures price (BEY of 4.9%) is incorrect using a zero-cost investment strategy involving the spot market and the futures market. (Of course, if the futures price is correct, this zero cost strategy will also have zero profit.) Show the actual dollar cash flows at time and at the expiration of the futures contract. Time 0: Borrow at the [Select] +$ [Select] Buy the Select] -$ [Select) Net cash flow $ Select [ Select ] the six-month futures contract At expiration in 6 mo: Pay back the loan plus interest - $ [Select] [Select] the bond we own to fulfill the futures contract +$ Select] Net cash flow +$ [ Select ]