An 8-year $1,000 par Treasury bond pays a 7 percent semi-annual coupon. The bond has a...

An 8-year $1,000 par Treasury bond pays a 7 percent semi-annual coupon. The bond has a conversion factor of 1.025. The risk-free is 6 percent and the annual yield on the bond is 7 percent. The bond just made a coupon payment. The price of a 15-month futures contract is closest to:

A. $1 049.32

B. $979.00

C. $983.32

Solutions

Expert Solution

Market Price of the Bond will be calculated as follow

Hence Market Price is closest to option A) $ 1049.32

Additional Knowledge

Here conversion Ratio is given from that one can find conversion value by multiplying conversion ratio with market price . But question has not asked to compute.

jeff jeffy answered 1 week ago

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