Explanation:
Janet Marshall has a short position in the contract. Therefore, the applicable quoted price derived by the conversion factor is the price Marshall will receive.
The cash price received by the short party of the contract is calculated as:
Cash received by the short party = (Most recent settlement price × Conversion factor) + Accrued interest
=
or USD 141.269 for a USD 100,000 face value contract
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Q.46 Janet Marshall, a fixed investment manager at Premium S&B, has a short position in 10-year Treasury bond futures contracts with a USD 100,000 face value for each contract. The last quoted price of the contract is 98-30, while the accrued interest on the bond is USD 5.23 (for USD 100 face value). If the conversion factor for the deliverable bond under the contract is 1.375, then the cash price:
A
Paid by the short party is USD 140.393
B
Received by the short party is USD 140.393
C
Paid by the short party is USD 141.269
D
Received by the short party is USD 141.269
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