There is a futures contract available on a dividend paying stock. The current stock price is $7.25 and a dividend of $2 will be paid after 6 months. The interest rate is 12% per annum (assuming discrete compounding). The fair price of the futures for delivery one year ahead is closest to which of the values below? Question 8Answer a. $5.90 b. $8.12 c. $5.50 d. $10.40

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.