Assignment:
The yield curve is upward sloping. You have a short T-Bond interest rate futures position. The following bonds are eligible for delivery:
|
Bonds
|
Spot-Price (USD)
|
Conversion Factor
|
Coupon Rate
|
|
A
|
102.44
|
0.98
|
4%
|
|
B
|
106.59
|
1.03
|
5%
|
|
C
|
98.38
|
0.95
|
3%
|
The futures price is 103 -17/32 and the maturity date of the contract is September 1. The bonds pay their coupon amount semi-annually on June 30 and December 31. With these data, the cheapest-to-deliver bond is:
a. Bond A
b. Bond B
c. Bond C
d. Insufficient information to determine.