D & R A1 8 - 2Question 8. Cheapest-to-Deliver BondToday is July 1. You hold a November Treasury bond futures contract with a price of 92:15 (i.e., 92 plus [15/32]), with a delivery date of November 15 in the same year. You have identified the two bonds below that could be used for delivery against the futures contract: Bond ABond BMaturity26.5 years31 yearsCoupon rate5%8.5%Asking price93:2144:13Coupon datesApril 15, October 15June 15, December 15Callable?NoNo Assume that the next year is not a leap year, and that the market repo rate is 5.50%.Identify the cheapest-to-deliver bond.

The Bond Quote price - Settlement price × conversion factor. Basis BOND A BOND B Years 20…

Answered: ay is July 1. You hold a November…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

D & R A1 8 - 2

Question 8. Cheapest-to-Deliver Bond

Today is July 1. You hold a November Treasury bond futures contract with a price of 92:15 (i.e., 92 plus [15/32]), with a delivery date of November 15 in the same year. You have identified the two bonds below that could be used for delivery against the futures contract:

	Bond A	Bond B
Maturity	26.5 years	31 years
Coupon rate	5%	8.5%
Asking price	93:2	144:13
Coupon dates	April 15, October 15	June 15, December 15
Callable?	No	No