The futures price for the June 2005 CBOT bond futures contract is 118-23. (a) Calculate the conversion
Question:
The futures price for the June 2005 CBOT bond futures contract is 118-23.
(a) Calculate the conversion factor for a bond maturing on January 1, 2021, paying a coupon of 10%.
(b) Calculate the conversion factor for a bond maturing on October 1, 2026, 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, what is the cash price received for the bond?
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