In: Finance
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
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.