Futures contracts on 90-day U.S. Treasury bills for delivery in 3 months carried a yield today of 10.25 percent while futures contracts on comparable T-bills for delivery in 6 months carried a yield of 10.625 percent. Today's yields on 90-day bills for immediate (cash) delivery are 10.12 percent. The implied market forecast is that interest rates will:
A) Rise between today and 6 months from today
B) Fall for the next 3 months, but rise thereafter
C) Rise over the next 6 months
D) Fall over the next 6 months
E) None of the above

Question

Quizplus · Accepted Answer

The yields on futures contracts are increasing from 10.25% for 3-month delivery to 10.625% for 6-month delivery, indicating an expectation of rising interest rates over the next 6 months.

Futures Contracts on 90-Day U