On June 25, 2014, the futures price for the June 2014 bond f
Question and Solution
On June 25, 2014, the futures price for the June 2014 bond futures contract is 118-23. (a) Calculate the conversion fact
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On June 25, 2014, the futures price for the June 2014 bond futures contract is 118-23. (a) Calculate the conversion factor for a bond maturing on January 1, 2030, paying a coupon of 10%. (b) Calculate the conversion factor for a bond maturing on October 1, 2035, paying a coupon of 7%. (c) Suppose that the quoted prices of the bonds in (a) and (b) are 169.00 and 136.00, respectively. Which bond is cheaper to deliver? (d) Assuming that the cheapest-to-deliver bond is actually delivered on June 25, 2014, what is the cash price received for the bond?
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