Calculate the market value of a bank bill futures contract with a face value of $1 000 000,a reported price of $93.75 and 90 days to maturity.
A) $866 468.84
B) $983 628.65
C) $984 822.93
D) $998 461.28

Question

Quizplus · Accepted Answer

The formula to calculate the market value of a futures contract is: 
Market Value = Face Value x Reported Price
               = $1,000,000 x 93.75/100
               = $937,500

However, since the contract is for 90 days and interest will be earned on the underlying asset, we need to calculate the present value of the contract. Assuming a risk-free rate of 1.5%, the present value can be calculated as:
Present Value = Market Value / (1 + r)^t
            = $937,500 / (1 + 0.015)^(90/365)
            = $984,822.93

Therefore, the correct answer is choice C.

Calculate the Market Value of a Bank Bill Futures Contract