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Can not understand why implied yield is 5% per annum. the yied for bill is (100-95)/95=5 percent but it is a 90-day bank bill so
Can not understand why implied yield is 5% per annum. the yied for bill is (100-95)/95=5 percent but it is a 90-day bank bill so I think 5% is the yield for 90 days and the yield per annum should be (1+0.05)^(365/90) -1, I am confused why in the question 5% is considered to be the yield per annum? Thanks for help!
A futures contract (assuming it is held to maturity) March: Trader takes a long position in a June futures contract on 90-day bank accepted bills at 95.00. This implies a yield of 5% per annum is to be used to value the futures contract. June: Trader must buy 90-day bank accepted bills with total face value of $1000000 at a yield of 5% per annum. The futures price that would be paid for the bills is: Futures price =1+100536590$1000000=$987821.38Step by Step Solution
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