Posts: 5
Joined: Wed Apr 13, 2016 6:39 am


Postby nivethasridhar3 » Mon Apr 25, 2016 9:31 am

Refer 2 images attached.
IMG_20160425_145802022.jpg (1014.94 KiB) Viewed 1826 times

IMG_20160425_145811602.jpg (916.03 KiB) Viewed 1826 times

In the question, if I solve using a time line,

FRA = (6.5%*(150/360) - (6%)*(60/360)

why is this incorrect? Where am I going wrong.


Finance Junkie
Posts: 780
Joined: Wed Apr 09, 2014 6:28 am

Re: Derivatives-

Postby edupristine » Sat May 07, 2016 6:02 am

Hi Nivethasridhar
In this Question you have to find out the T-bill future contract which is calculating by following steps (1 - 60/360*.06) = 0.99? Choice A

the price for the 60 day T-Bill.

Bo(60) = 1 - .06(60/360) = .99
Bo(150) = 1 - .065(150/360) = .9729

Fo(60) = Bo(150)/Bo(60) = .9729/.99 = .9827

Similarly, the Futures price can be worked out by finding out the rate we need to compound the 150 day T-Bill at by using the price of the 60 day T-Bill:

1/.99 = 1.0101

Fo(60) = Bo(150)*ro(60) = .97292*1.0101 = .98274
so here you don't have need of calculating FRA.

Return to “CFA Level II”


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.