No one to help me on this one ? :/
Hello everyone ! I have a financial maths exercice that i want to work on but i'm stuck at the beggining since , well , my financial vocabulary is quite limited so i dont understand some of the data that is given...anyways i would like to know first how to proceed to solve the first question of this exercice
PS: i have the solution and it says that the three theoritical future prices are respectively : 123.75 124.90 126.55 , but i dont know how to proceed to get these results...
Exercise 1
On January 31, 2011, the price of the Euro-bund contract for the March 2011 maturity was 123.70. Based on the information available in appendix 1 and 2:
- Determine the theoretical value of the contract.
- Determine the implied repo rate.
- Determine the result of a cash-and-carry arbitrage.
- Determine which of the 3 bonds available for delivery is the cheapest-to-deliver.
The money market rate is 0.956% pa.
Appendix 1: Deliverable bonds – Maturity: Mach 2011
Settlement date: March, 10 2011
Code ISIN Coupon
(%)Maturity Conversion
FactorDE0001135390 3.25 04.01.2020 0.815645 DE0001135408 3.00 04.07.2020 0.790231 DE0001135416 2.25 04.09.2020 0.734383
Appendix 2: Information on deliverable bonds (On January, 31 2011)
Code ISIN Issue date Clean price Accrued interest YTM
(%)M.Duration DE0001135390 13.11.2009 101.16 0.2582 3.099 7,637 DE0001135408 30.04.2010 98.90 2.2849 3.134 7,906 DE0001135416 20.08.2010 93.07 1.0233 3.095 8,343