A manager establishes a collateralized commodity futures position with a contract value of $20 million. He purchases 60-day Treasury Bills (T-bills) with a bank discount yield of 8.867% to collateralize the futures position. After 60 days, the loss on the futures position is $100,000. The Holding period return on the position, is closest to: A. -.5000% B. .9978% C. 1.0000% D. 1.2254%

B. 8.867% *(60/360) = 1.48% 20,000,000 * 1.0148 = 20,296,000 20,296,000 - 100,000(loss of futures) =20,196,000 20,196,000/20,000,000 = 1.0098 - 1 = 098% Probably off due to rounding. Is that right?

B? Price of t-bill = 20000 / 1.0148 = 19708 Holding Period Gain = 20000 - 19708 - 100 ) / 19708 = .9742 Closest is b.

the answer is D…but i can’t figure how they arrive at that conclusion…I also thought B was correct

This has been discussed before and the consensus then was B http://www.analystforum.com/phorums/read.php?11,627769,627769#msg-627769 Could you post the solution?

It was C. The key is 8.867% and hence 1.48% is the discount yield. The effective holding period yield for the T bills position is 1.5% - .5% loss equal to 1%. I’m getting tired of Schweser giving us the wrong answers. I found 3 wrong answers so far in sample exam 2 morning session