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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
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