1. Quoted price of the bond is $105. Coupon is 10% per year, paid twice a year. Par value is $100.The most recent coupon was paid 50 days ago, and the next coupon will be paid 132 days fromnow. Find the cash price of the bond. Round to the nearest integer.• Cash Price of Bond = Quoted Price + Accrued InterestCoupon amount is 10%*100*(1/2)= 5Paied twice per yearQuoted price of the bond is given 1
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1. Quoted price of the bond is $105. Coupon is 10% per year, paid twice a year. Par value is $100.

The most recent coupon was paid 50 days ago, and the next coupon will be paid 132 days from

now. Find the cash price of the bond. Round to the nearest integer.

• **Cash Price of Bond = Quoted Price + Accrued Interest**

Coupon amount is 10%*100*(1/2)= 5

Paied twice per year

Quoted price of the bond is given 105

The cash price of the bond= 105+(50/132*$5)=106.89

2. Cash price of the bond is 116.978. The next coupon of $6 will be paid in 122 days (0.3342 years).

The term structure is flat, and the interest rate is 10%. Using the parity equation for T-bond

futures, find the cash futures price for delivery in 250 days (0.6849 years). Round to the nearest

integer.

6*e^(.1*.3342)=5.803

116.978-5.803= 111.175

111.175*e^(.1*.6849)= 119.056

3. Which of the statements below is INCORRECT regarding convenience yield?

Convenience yield applies to commodity futures

Convenience yield is a net benefit of having the underlying asset on hand

When convenience yield is zero, the forward curve is in backwardation

When convenience yield is higher than the storage (carrying) cost, F < S

Backwardation

Spot price > Futures priceS(t) > F(t,T)

• Contango

Spot price < Futures price S(t) < F(t,T)

• Basis (temporal basis)

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