1. Suppose the September CBOT Treasury bond futures contract has a quo

QUESTION

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?2. Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1.00 percent
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? Note and bond prices are quoted in dollars and fractions of a dollar. By market convention, the normal fraction used for Treasury security prices is 1/32. In the report, the decimal point separates the full dollar portion

of the price from the 32nds of a dollar, which are to the right of the decimal. Thus the quote of 89-09 means $89 plus 9/32 of a dollar, or $89.281,for each $100 face value of the note. Thus rate of return will be $ 100.00 $ 89.281 / $ 89.281 X 100 = 12 %

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION