Determine which is the cheaper bond to deliver

Assignment Help Financial Management
Reference no: EM131325860

On September 26 of a particular year, the March Treasury bond futures contract settlement price was 94-22. Compare the following two bonds and determine which is the cheaper bond to deliver. Assume delivery will be made on March 1. Use 5.3 percent as the repo rate.

a. Bond A: A 12 3/4 percent bond callable in about 19 years and maturing in about 24 years with a price of 148 9/32 and a CF of 1.4433. Coupons are paid on November 15 and May 15. The accrued interest is 4.64 on September 26 and 3.73 on March 1.

b. Bond B: A 13 7/8 percent bond callable in about 20 years and maturing in about 25 years with a price of 159 27/32 and a CF of 1.5689. Coupons are paid on November 15 and May 15. The accrued interest is 5.05 on September 26 and 4.06 on March 1.

Reference no: EM131325860

Questions Cloud

Why do researchers use factor analysis : Imagine that you conducted a factor analysis on a set of variables that were uncorrelated with one another. How many factors would you expect to find? Why?
Identify whether an arbitrage opportunity is available : Assuming no basis risk between Fed funds and one-month LIBOR at the start of the delivery month, identify whether an arbitrage opportunity is available.
Determine the annualized rate of return : Determine the annualized rate of return she earns over 180 days and compare it to the annualized rate of return on the 180-day CD.
What are the attributes of an organized crime group : Organized Crime and Criminal Investigation: Respond to the following questions: What are the attributes of an organized crime group? What is R.I.C.O.? What types of groups have been prosecuted under R.I.C.O.
Determine which is the cheaper bond to deliver : Compare the following two bonds and determine which is the cheaper bond to deliver. Assume delivery will be made on March 1. Use 5.3 percent as the repo rate.
Define leadership and provide a brief historical overview : CRJU 560:Define leadership and provide a brief historical overview of the development of leadership theories.Select two theories and discuss in detail. Give examples of the application of these theories to criminal justice leadership.List and descri..
Investigating the crime as well as seizing evidence : Provide a couple of examples of computer crimes and explain how they differ from traditional crimes. Describe the unique challenges computer crimes present to investigators.  Your discussion of challenges should include identifying and investigati..
Determine which of two bonds is the cheaper bond : It is August 20, and you are trying to determine which of two bonds is the cheaper bond to deliver on the December Treasury bond futures contract.
Determine the implied repo rate on the contract : The June futures price is 100 17/32. - Assume a 5.5 percent reinvestment rate. Determine the implied repo rate on the contract. Interpret your result.

Reviews

Write a Review

Financial Management Questions & Answers

  Differences between a micro hedge and a macro hedge

What are the differences between a micro hedge and a macro hedge for an FI? Why is it generally more efficient for FIs to employ a macro hedge than a series of micro hedges?

  Problem in a world with corporate taxes what happens when

problem in a world with corporate taxes what happens when the firm adds debt to its capital structure?lucky bamboo is a

  Assume that two investments are combined in a portfolio

Assume that two investments are combined in a portfolio. In words, what is the expected rate of return on the portfolio? What condition must be present for the portfolio to have lower risk than the weighted average of the two investments? Is it possi..

  Preparing an effective case analysis

The goal is to place yourself in an executive leadership role within the organization described in the case. In that role, you are responsible for aiding in the development of a long-term strategic plan for the company. This will require some additio..

  What are the primary problems or issues the fasb

What are the primary problems or issues the FASB attempts to address regarding accounting for derivative financial instruments?

  What is the price of bond-using semi annual coupon payments

You now own a 14% annual coupon bond maturing in four years and yield 16%. (Please show how you got your answers, show the calculations.) What is the price of the bond? (Using semi annual coupon payments) What si the duration of this bond?

  Maximum amount the firm should pay for the investment

An investment is expected to generate $1,000,000 each year for 4 years. If the firm's cost of funds is 10%, what is the maximum amount the firm should pay for the investment?

  Projects have differing cash flows and finite lives

Assume you are looking at a graph that relates the net present value of two mutually exclusive investment projects to various discount rates. Assume the projects have differing cash flows and finite lives. Which one of these statements accurately ref..

  High mexican interest expenses when financing expansions

In recent years, several U.S. firms have penatrated Mexico's market. One of the biggest challenges is the cost of capital to finance businesses in Mexico. Mexican interest rates tend to be much higher than U.S. interest rates. How might U.S.-based Mu..

  What is this firms market-to-book ratio

A firm has current assets that could be sold for their book value of $10 million. The book value of its fixed assets is $60 million, but they could be sold for $90 million today. The firm has total debt with a book value of $40 million, but interest ..

  What is the company cost of equity capital

Halestorm Corporation’s common stock has a beta of 1.24. Assume the risk-free rate is 4.9 percent and the expected return on the market is 12.4 percent. What is the company’s cost of equity capital?

  Stock portfolio consists-what is return on your portfolio

Your stock portfolio consists of only 2 stocks. You have $15,000 in Company A and $25,000 in Company B. Company A has an actual return of -8%, and Company B has a return of 12%. What is the return on your portfolio?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd