Calculate the conversion factor for a bond

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Reference no: EM131404139

It is June 25, 2001. The futures price for the June 2001 CBOT bond futures contract is 118-23.

a. Calculate the conversion factor for a bond maturing on January 1, 2017, paying a coupon of 10%.

b. Calculate the conversion factor for a bond maturing on October 1, 2022, 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, what is the cash price received for the bond?

Reference no: EM131404139

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