Question: A 6 year bond with a 4 coupon sells for 102 46
A 6-year bond with a 4% coupon sells for $102.46 with a 3.5384% yield. The conversion factor for the bond is 0.90046. An 8-year bond with 5.5% coupons sells for $113.564 with a conversion factor of 0.9686. (All coupon payments are semiannual.) Which bond is cheaper to deliver given a T-note futures price of 113.81?
Relevant Questionsa. Compute the convexity of a 3-year bond paying annual coupons of 4.5% and selling at par. b. Compute the convexity of a 3-year 4.5% coupon bond that makes semiannual coupon payments and that currently sells at par. c. Is ...Suppose you observe the following par coupon bond yields: 0.03000 (1-year), 0.03491 (2-year), 0.03974 (3-year), 0.04629 (4-year), 0.05174 (5-year). For each maturity year compute the zero-coupon bond prices, effective annual ...Using the zero-coupon bond prices and natural gas swap prices in Table 8.9, what is the implicit loan amount in each quarter in an 8-quarter natural gas swap? Consider the same 3-year oil swap. Suppose a dealer is paying the fixed price and receiving floating. What position in oil forward contracts will hedge oil price risk in this position? Verify that the present value of the ...Suppose call and put prices are given by Find the convexity violations. What spread would you use to effect arbitrage? Demonstrate that the spread position is an arbitrage.
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