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Bryan bought a 210-day bank bill with a face value of $2 million, priced to...

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Accounting

Bryan bought a 210-day bank bill with a face value of $2 million, priced to yield 5.30 per cent per annum with the intention of holding it for 120 days before selling it as a 90-day bank bill. To hedge the selling price, Bryan simultaneously sold a futures contract on a 90-day bank bill that expires in 120 days time. The futures price is 94.55 and the face value of the bill underlying these contracts is $2 million. i) Identify the amount and timing of Bruces net cash payments and receipts and ii) calculate the yield (simple interest, in percent per annum) he will achieve on his investment in the bank bill. (Ignore any cash flows from marking-to-market.)

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