The settlement price of a deliverable forward contract at 6% on a $1 million 90-day Treasury bill would be: A. determined by the market rates at expiration. B. $940,000. C. $985,000.
Treasury bills are quoted as a discount from face value, which is annualized based on a 360 day year. (90/360) × 6% = 1.5%, so the contract price of the $1 million bill is [1 − 0.015] × 1,000,000 = $985,000.
