Example 5.4 On August 31, 2007, the 30-year T-bond with a coupon of 5.00% and maturing on May 15, 2037, was quoted at a clean price of 102.50. The general collateral repo rate for a term of one month was 4.775%. A bond dealer receives an order from a client to buy this bond forward in one month's time. What is the forward price that dealer should quote? Why? How should the dealer hedge the exposure, assuming that the deal is done on August 31, 2007?

Example 5.4 On August 31, 2007, the 30-year T-bond with a coupon of 5.00% and maturing on May 15 , 2037 , was quoted at a clean price of 102.50 . The general collateral repo rate for a term of one month was 4.775%. A bond dealer receives an order from a client to buy this bond forward in one month's time. What is the forward price that dealer should quote? Why? How should the dealer hedge the exposure, assuming that the deal is done on August 31,2007