On June 25, 2014, the futures price for the June 2014 bond futures contract is 118-23. (a)

Question:

On June 25, 2014, the futures price for the June 2014 bond futures contract is 118-23.

(a) Calculate the conversion factor for a bond maturing on January 1,2030, paying a coupon of \(10 \%\)

(b) Calculate the conversion factor for a bond maturing on October 1, 2035, paying a coupon of \(7 \%\).

(c) Suppose that the quoted prices of the bonds in (a) and (b) are 169.00 and 136.00, respectively. Which bond is cheaper to deliver?

(d) Assuming that the cheapest-to-deliver bond is actually delivered on June 25, 2014, what is the cash price received for the bond?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: