A Treasury Bond Futures is currently trading at 150 or 150% of 100,000 par.

One of the many bonds, Bond Y, is eligible for delivery as follows: Bond Coupon Rate Conversion Factor Full Price Today Y 4% .9 134 Assume the delivery date for the contract is 5 months from now. Also, the next semiannual coupon interest payment will occur six months from today (1 month after delivery). The current repo rate is 2% per year. a) If the short seller buys the bonds today and sell it on the delivery date at the locked-in futures price. Calculate the accrued interest for Bond Y to be received by the short seller on the delivery date. Show computation. Since there is no coupon to be paid during the holding period, in this case, there will be no reinvestment income. b) Calculate the return for cash and carry for Bond Y. c) Suppose the return for cash and carry is 1.2% per year. Should cash and carry be done with such bond today? Explain briefly why or why not.