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Suppose the September CBOT Treasury bond futures contract has a quoted price of 89-09. What is the implied annual interest rate inherent in this futures contract? Assume this contract is based on a 20 year Treasury bond with semi-annual interest payments. The face value of the bond is $1000, and the semi-annual coupon payments are $30. The annual coupon rate on the bonds is $60 per bond (or 6%). The futures contract has 100 bonds.

  • Finance -

    N: 40
    PV = (0.89+0.09/32) × $1,000 = -$892.81
    FV = $1,000
    PMT = $30
    I/YR = 3.5%

    Annual rate: I/YR × 2 = 7.00%

  • Finance -

    1-Suppose the September CBOT Treasury bond futures contract has a quoted price of 89-09. What is the implied annual interest rate inherent in this futures contract?
    a. 6.32%
    b. 6.65%
    c. 7.00%
    d. 7.35%
    e. 7.72%

    2-Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. What is the implied annual interest rate inherent in the futures contract?
    a. 6.86%
    b. 7.22%
    c. 7.60%
    d. 8.00%
    e. 8.40%
    3-Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1.00 percentage point, what is the gain or loss on the futures contract? (Assume a $1,000 par value, and round to the nearest whole dollar.)
    a. -$78.00
    b. -$82.00
    c. -$86.00
    d. -$90.00
    e. -$95.00

  • Finance -

    3 is d

  • Finance -

    I think 3 is loss of $78

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