Assume that you observe the following prices in the T-Bill and Eurodollar futures markets

T-Bill Eurodollar

September 95.24 94.6

a. If you expected the TED spread to narrow over the next month then an appropriate strategy would be to do what long or short and why?

b. Assume that a month later the price of the September T-Bill future is 96.25 and the price of the Eurodollar future is 95.9. Calculate the profit on the T-Bill futures position.

c. Assume that a month later the price of the September T-Bill future is 96.25 and the price of the Eurodollar future is 95.9. Calculate the profit on the Eurodollar futures position.