Constituent deposits in the initial entry stage

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Question

Since it is important to match the relative sizes of the 4 deposits underlying the index, you need to be careful when dividing the total amount into the 4 constituent deposits in the initial entry stage. Assuming that the official cash rate remains constant at 1.5% over any 4 week period, and noting that any amount not deposited for 4 weeks must be deposited on a weekly basis at the overnight cash rate, explain how to compute the 4 notional amounts into which you need to divide the $100,000,000. For simplicity, you may also assume that one of the deposits has just been rolled, so that it has 4 weeks to maturity.

Reference no: EM134029975

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