Example $4($Conversion factor$)$

$CF=PV-AC$

PV is the present value at maturity date of the future contract of the actual asset discounted at rate $r$

$AC$ is the amount of the accrued interest of the same asset

Consider a $1-$year future contract whose underlying asset is a fictitious $10-$year maturity bond with a $6\%$ annual coupon rate. Suppose that the asset to be delivered is at date $10$ a $10-$year maturity bond with a $5\%$ annual coupon rate whose accrued interest is $2\%$ of the nominal amount.