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Futures contract delivering in 14 months of a bond paying, semi-annually, coupon at a rate of 5.69 percent per year on $100 face value, with a maturity of 11.69 years and 3 months from now. The last coupon payment was 3 months ago. Assume that the term structure is flat with a rate of interest of 7 percent per year. Assume semi-annual compounding for valuation of bond and for determination of conversion factor. Assume continuous compounding for valuation of futures price. Write the answers to the following: a)Conversion factor. b)Cash spot price of bond. c)Cash futures price. d)Quoted futures price.

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Financial Management, Finance

Category:- Financial Management
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