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A Treasury Bond futures contract has a settlement priced of 89’08. What is the implied annual yield? (Hint: You can use a financial calculator.) Assume this is a a 20-year bond with semiannual interest payments. The face value of the bond is $1,000, and the semiannual coupon payments are $30, which means the annual coupon rate is 6%. The futures contract has 100 bonds
The price of hypothetical bond is $100 (89 + 8/32)/100 = $892.50. Using a financial calculator, we solve for rd as follows N = 40,…

PV = -892.50 PMT = 30 FV = 1000 Solving for I/YR = 3.50. The annual rd is 3.50*2 = 7.0%

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