Question

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.

Answer 1

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%

Answer 2

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

Answer 3

3 is d

Answer 4

I think 3 is loss of $78