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Chapter 17 Excel Application: Parity and Spreads
1. Experiment with different values for both income yield and interest rate. What happens to
the size of the time spread (the difference in futures prices for the long versus short
maturity contracts) if the interest rate increases by 2%?
6.5%. The new difference of 2.53 shows an increase in the size of the time spread if interest rates
increase.
2. What happens to the time spread if the income yield increases by 2%?
First return values to base case (Interest Rate = 4.5%).
[Change cells : 6 4.5]B=
3. What happens to the spread if the income yield equals the interest rate?
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