Which of the two bonds is cheaper to deliver

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Reference no: EM13873327

A 5-year bond with a 4.45% coupon sells for $107.48. A 7-year bond with a 5.75% coupon sells for 116.564. The conversion factor for the 5-year bond is 0.933891 while the 7-year bond is 0.98588. Assume that the yields for both bonds are 6% and that coupon payments are semi annual. Which of the two bonds is cheaper to deliver given a T-note futures price of 117.92?

Reference no: EM13873327

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