T bill future calculation

[h21]

I am having headache understanding this equation for futures price calculation, can someone please help me better understand this?
f0(h)/B0(h+m)=1/B0(h)
I think I am having trouble with this
one would buy the 140-day T-bill for 0.9780 and sell the futures at a price of 0.9829. Then, 50 days later, the T-bill would be a 90-day T-bill and would be delivered to settle the futures contract

someone?

 

[JayWill]

Stay focused on the Learning Outcome Statements. Margin and Repo Rates in Reading 48 (and when they’re discussed again in Reading 51), as well as Example 3 in R48, are part of Optional Reading sections. In other words, they won’t be tested on the exam.
That formula looks its part of pricing T-Bill futures, which again, is part of the Optional Reading section of R48.

 

[h21]

thanks, can you explain that equation for me? i cant seem to put my head around it

 

[S2000magician]

Where’d you get the formula?

 

[h21]

eoc 7.2.1
On day 0, we buy the (h + m)-day T-bill, investing B0(h + m). We simultaneously sell a futures contract at the price f0(h). On day h, we are required to deliver an m-day T-bill. The bill we purchased, which originally had h + m days to maturity, now has m days to maturity. We therefore deliver that bill and receive the original futures price. We can view this transaction as having paid B0(h + m) on day 0 and receiving f0(h). Because f0(h) is known on day 0, this transaction is risk free. It should thus earn the same return per dollar invested as would a T-bill purchased on day 0 that matures on day h. The return per dollar invested from the arbitrage transaction would be f0(h)/B0(h + m), and the return per dollar invested in an h-day T-bill would be 1/B0(h).35 Consequently, we set these values equal