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On April 1st, the 6-month forward price for a Treasury Bill (to be paid on October 1st) that pays 1$ of face value on January
On April 1st, the 6-month forward price for a Treasury Bill (to be paid on October 1st)
that pays 1$ of face value on January 1st (the year after) is 0.99. On April 1st, the spot
price for bills of the same face value and maturing on October 1st and January 1st is
0.98 and 0.975, respectively.
a. Calculate the arbitrage-free treasury-bill forward price (the market price of this
forward is 0.99, as mentioned above). In your calculation, highlight what is the
arbitrage-free forward interest rate from October 1 to January 1.
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