Keshi Co 12/14

The basis is the difference between the spot rate and the futures price, and will be positive or negative depending on which is the higher of the two (but will always stay positive or always stay negative as it approaches zero by the end of the future). In this question it was a little bit unfair of the examiner not to make it clear as to which is the higher of the two (and he usually does), and so if you had done what you are wanting to do then you would still have got the marks :-) (Have you watched my free lectures on the management of interest rate risk?)