Hello - could anyone help with the following question??
Information : I have the opportunity to invest $10 million in a US money market instrument for 180 days at discount yield of 0.70%. This gives a discount price =ROUND(1/(((r*T)/360)+1),5) = 0.99651 and discount amount = $9,965,100.
Question : If I am confident that 80 days into the term rates are going to increase by 20bps, should I still invest the $10 million in the MM instrument?
I’ve tried using duration and break-even yield analysis, and looking at forward implied rates but I’m just not sure how to answer this.
Any help would be appreciated!