Q6.11 It is July 30, 2018. The cheapest-to-deliver bond in a September 2018 Treasury bond futures contract is a 13% coupon bond, and delivery is expected to be made on September

30, 2018. Coupon payments on the bond are made on February 4 and August 4 each year. The term structure is flat, and the rate of interest with semiannual compounding is 12% per annum. The conversion factor for the bond is 1.5. The current quoted bond price is $110. Calculate the quoted futures price for the contract. Hints: The rate of interest with continuous compounding is 2ln 1.06 = 0.1165 or 11.65% per annum. There are 176 days between February 4 and July 30; and 181 days between February 4 and August 4. A semi-annual coupon will be received in 5 days.