1. The most recent settlement T-bond futures price is 110. Which of the following four bonds is cheapest to deliver (use the gross basis)?

1. Quoted bond price = 123; conversion factor = 1.1000.
2. Quoted bond price = 155; conversion factor = 1.4000.
3. Quoted bond price = 145; conversion factor = 1.3000.
4. Quoted bond price = 137; conversion factor = 1.2200.