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You Believe That the Spread Between the September T-Bond Contract

question 52

Multiple Choice

You believe that the spread between the September T-bond contract and the June T-bond futures contract is too large and will soon correct. This market exhibits positive cost of carry for all contracts. To take advantage of this, you should ________.


Definitions:

Net Interest

The difference between the revenue from interests received on various investments and the expenses from paying interest on borrowings.

Defined Benefit Liability

The present value of the future retirement benefits that an employer has committed to pay to employees, as defined by their pension plan terms.

Projected Benefit Obligation

An estimate of the total amount of benefits, both vested and non-vested, that a company expects to provide to employees in pension plans.

Prior Service Cost

The cost of additional benefits granted to employees in a pension plan amendment, attributed to employee service in prior periods.

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