A Treasury bond futures contract has a settlement price of 89'08. What is the implied annual...
A Treasury bond futures contract has a settlement price of 89'08. What is the implied annual yield?
| Price in whole units | ? | |
| Price in 32nds | ? | |
| Maturity in semiannual period | ? | |
| Semiannual coupon payments | ? | |
| Maturity value | ? | |
| Price | ? | |
| Semiannual implied yield | ? | |
| Annual implied yield | ? |
Homework Answers
The answer is 7.01%
Calculations:
$1000*(89+8/32)/100 = 892.50
Value of contract = 892.50*100 = $89,250
In the financial calculator solve for I/YR. N = 40 (20 years of semi-annual payments).
PMT = 30, FV = 1000.
Thus PV = 892.50
Solving for I/YR = 3.504%
Then: 3.504%*2 = 7.01%
Thus implied annual yield = 7.01%
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