Good Student
Posts: 23
Joined: Sat Jun 25, 2016 8:13 am


Postby mayankmundhra30 » Thu Aug 25, 2016 5:35 am

I have the following doubts

1)Johnson has invested in a bond. It pays 8% semi- annual coupon. It has a quoted price of 100 and conversion factor of 1.2. There are 180 days between the coupons and last coupon was paid 50 days ago. Assume a treasury bond futures contract is to be delivered 180 days from today and the risk free rate is 4%. Calculate theoretical price for the T-bond futures contract
Choose one answer.
a. 97.99 Incorrect
b. 99.10 Incorrect
c. 97.17 Incorrect
d. 81.66 Correct
The correct answer is D
Accrued interest: 4*50/180 = 1.11. Cash price = 100+1.11=101.11. Next coupon will be received 130 days from today. Hence present value of next coupon is = 4*exp(-0.04*130/365) = 3.94. Fo = (101.11-3.94)*exp(0.04*180/365) = 99.10. Since the contract expires 50 days after the last coupon payment, the quoted futures price is calculated as, cash futures price – accrued interest = 99.10 – (4*50/180) = 97.99. Theoretical price = 97.99/1.2 = 81.66.

In the above sum could you please explain the part after calculating the Fo= 99.10.

2)If cash price on a 180 day T-bill is quoted as 97.5. The discount rate is closest to:
In this question do we need to find monthly, semi annual or annual discount rate.

Return to “FRM Part I”



Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.