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28 May, 10:34

Consider a futures contract for the delivery of a two-period bond with M=100 in one period from today. There are four deliverable bonds: A, B, C, and D. The prices and conversions factors of these four bonds on the delivery date are P (A) = 100, conversion factor (A) = 1.05; P (B) = 105, conversion factor (B) = 1.04; P (C) = 103, conversion factor (C) = 1.04; P (D) = 99, conversion factor (D) = 0.98. Which one of the above four bonds will be delivered? A. Bond B B. Bond D C. Bond C D. Bond A

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  1. 28 May, 13:34
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    The correct answer is () D. Bond A.

    Explanation:

    From the question provided, the bond that will be delivered is Bond A.

    The reason is that, The bond A has the highest conversion factor when measured to other bonds and must be delivered.

    The Bond A prices and conversions factors with its delivery date will be get there on time before other bonds, because of its high rate.
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