Explanation:
We have 184 days (=30+30+31+30+31+31+1 in March, April, May, June, July, August, and September, respectively). We have 92 days between March 1 and June 1 (= 30 + 30 + 31 + 1 in March, April, May, and June, respectively).
The accrued interest on June 1 is, therefore:
3` \times \frac{92}{184} = 1.5$$
We know that, Clean Futures Price = Dirty Futures Price – Accrued Interest
Thus, Dirty Futures Price = Clean Futures Price + Accrued Interest = 121.4848 + 1.5 = 122.9848 ≈ 123
The correct answer is C (123.00).
Q.4929 Suppose that the bond that will be cheapest to deliver in a Treasury bond futures contract pays annual coupons of 6% per annum on March 1 and September 1 and will be delivered on June 1. Suppose further that the bond's clean futures price is 121.4848 on June 1, and its conversion factor is 1.2424. If all interest rates are 5% continuously compounded, what is the dirty price on June 1?
A
121.99
B
119.46
C
123.00
D
123.51
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