Question
Suppose you sell a March 2010 T-bond futures contract at 98:26. Now it is time to consider delivery. You want to deliver on 03/15/2010. There
Suppose you sell a March 2010 T-bond futures contract at 98:26. Now it is time to consider delivery. You want to deliver on 03/15/2010. There are two bonds you are considering using. Bond A, which is quoted at 98:17, has a 6.25% coupon that matures in 11/15/2032 with a conversion factor of 1.0310.; Bond B, which is quoted at 97:05, has 5.5% coupon that matures in 06/15/2030 with a conversion factor of 0.9403. Both bonds make semiannual coupon payments.
(1) Which bond should you use to deliver?
(2) What is the invoice price for the bond that you choose?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started