Quoted Futures Price 125
Conversion Factor 0.9
Time Remaining to Contract Expiration - 3 months
Accrued Interest over life of contract 0
Underlying Bond:
Quoted Bond Price 112
Accrued Int. since last coupon 0.08
Accrued Int. at Futures expiration 0.20
Based on Exhibit 1 and assuming annual compounding, the arbitrage profit on the bond futures contract is closest to:
Answer is 0.5356.
When I am trying to find arbitrage profit for a bond futures contract under carry arbitrage, why do I have to compare the futures price on the actual bond? Why does it not work when I compare the quoted futures price (generic bond)?