The futures price for the June 17, 2009 CBOT bond futures contract is 118-23.
1. Calculate the conversion factor for a bond maturing on Jan 1, 2025, paying a coupon rate of 9.5%.
2. Calculate the conversion factor for a bond maturing on Oct 1, 2030, paying a coupon rate of 7.5%.
3. Suppose that the quoted prices of the bonds in (a) and (b) are 167 and 134, respectively. Which bond is cheaper to deliver?
4. Assuming the cheapest-to-deliver bond is actually delivered, what is the cash price received for the bond?
The question belongs to Finance and it is about futures prices. Here a futures bond has been given and you need to calculate conversion factor for bond maturing on different dates with different rates of interest.
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