Determining futures prices with bonds maturing

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Problem:

The futures price for the June 17, 2009 CBOT bond futures contract is 118-23.

1. Calculate the conversion factor for a bond maturing on Jan 1, 2025, paying a coupon rate of 9.5%.

2. Calculate the conversion factor for a bond maturing on Oct 1, 2030, paying a coupon rate of 7.5%.

3. Suppose that the quoted prices of the bonds in (a) and (b) are 167 and 134, respectively. Which bond is cheaper to deliver?

4. Assuming the cheapest-to-deliver bond is actually delivered, what is the cash price received for the bond?

Additional Information:

The question is from Finance and it is about futures prices. Here futures bond has been given and you need to compute conversion factor for bond maturing upon different dates with different rates of interest.

Reference no: EM13828236

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