Given the following information:

Settlement date: 13 August 2001

Treasury bond maturity date: 25/11/2010

Treasury bond coupon rate: 6.25 percent, paid semiannually

Treasury bond quoted price: 110.20

Futures quoted price: 115.94

Futures expiry date: 28/09/2001

Repo rate: 4.9 percent

Assume that the bond has a $100 million face value, and futures contract has a $1 million

nominal amount.

a) What is the implied repo rate? Interpret your finding.

b) What is cash and carry arbitrage trade? Explain the process.

c) Is there a cash-and-carry arbitrage based on the information above?

d) What is the dollar amount of profit or loss?