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...
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
DE0001135390 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