The futures price for the June 2011 CBOT bond futures contract is 118-23. (a) Calculate the conversion
Question:
The futures price for the June 2011 CBOT bond futures contract is 118-23.
(a) Calculate the conversion factor for a bond maturing on January 1, 2027, paying a coupon of \(10 \%\).
(b) Calculate the conversion factor for a bond maturing on October 1, 2032, 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, 2011, what is the cash price received for the bond?
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Bond Futures Conversion Factor Calculation The conversion factor CF is used to convert the futures price of a bond futures contract to a cash price fo...View the full answer
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