Solution Library

Determining Futures Prices with Bonds maturing at different times and with different coupon rates

Question

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?

Summary
 
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.

Total Word Count 170


 

Download Full Solution

Comments

  • HWA
    Rasha

    this is a very good website

  • HWA
    maani

    I have 50 questions for the same test your page is showing only 28

  • HWA
    joeanne

    hi can you please help or guide me to answer my assignments. thanks

  • HWA
    joeanne

    hi can anyone help or guide me to my assignments. thanks

  • HWA
    Monik


  • HWA
    Cristina

    This solution is perfect ...thanks

  • HWA
    Janete

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA
    Sandeep

    Perfect bank of solution. 

  • HWA
    Oxana

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA
    Giuseppe

    works fine.