32 we y d Ay 16 y 5. You have a short position in the Treasury futures bond contract. Let's assume that you are going to deliver, and that the current futures price is 112.5 and today is October 15. Given the following data on Treasury bonds which bond would you deliver? Explain how you made your choice. Treasury Bonde Cash price Coupon 14 2 982 1012 22 40 Date of Last Coupon Payment August 5 September 6 Conversion Factor 0.80 0.85 6. A few months ago, a trader entered into a Forward Rate Agreement (FRA) in which it agreed to pay a fixed rate of interest equal to 4%. The notional size of the FRA is $50,000,000. The FRA will start in four months and last for three months. Using the information below, find the value of the FRA from the perspective of the trader. 1sCho 1 Month Spot Zero Rate (%) Based on continuous compoundinge 2.02 2.00 12 2 3e 40 3.0- 3.0 4.0 4.00 5.00 52 6 72 7. Some time ago, a trader entered into a currency swap agreement involving UK pounds and Euros. The swap will last three more years and requires the traders to make payments at the end of each year. The trader has agreed to pay 6% per year in pounds and receives 5% per year in Euros. Payments are exchanged at the end of each year. The term structure of interest rates in both the UK and Europe is fiat. The UK rate is equal to 5% and the rate in Europe is equal to 4% (both rates are based on continuous compounding). The principals in the two currencies are 100 million Euros and 80 million pounds. The current spot exchange rate is 1.2 Euros per UK pound. Using the above information, find the value of the currency swap for the trader in pounds. Value the swap as a portfolio of forward exchange rate agreements. w A