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


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.

Total Word Count 170


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