Find the Future Price of Treasury Bond

CFA Level II
#1

But you don’t get T or rfr! What’d you do?

#2

i did mkt value- pv of coupons ---- was a guess

#3

thats what I did and got choice C. i thought it wasway too simple and was a trap answer. chose B (guess).

#4

I’m pretty sure its MKT value - FV of coupons.

#5

I did par minus pv of coupons lol. Who knows

#6

Mkt - pv of coupons - was a guess for me too but what made most sense.

#7

i used future value as all my quick study sheets for futures stuff used future value of coupons and forwards used present values…will dislcaim that my answer was also a guess.

#8

FV of coupons. or PV of coupons? thepinkman Wrote: ------------------------------------------------------- > I’m pretty sure its MKT value - FV of coupons.

#9

I choose the largest one because (MV-PVC) already gave you that amount. I figured that multiplying by the Rf (which wasnt given) would only make the value larger so I chose C.

#10

pv

#11

nirjraina Wrote: ------------------------------------------------------- > I choose the largest one because (MV-PVC) already > gave you that amount. I figured that multiplying > by the Rf (which wasnt given) would only make the > value larger so I chose C. Exactly my logic.

#12

I flipped between B/C atleast 3 times in the last 5 minutes of the session :slight_smile:

#13

i did market value - FV of coupons that question was really stupid because unless there’s something really obvious that i’m missing it didn’t tell you whether the market price is the future or present value or anything like that. because the rfr wasn’t given, i figured it means future value.

#14

FP = (So - PVD)*(1+RFR)^T or FP = So * (1+RFR)^T - FVD I figured that given only the par and market rate, the market rate must be represneted be S0* (1+RFR)^T MIght be overanalysing

#15

I choose c but when I thought it about more the question asked for arbitage. So the guy short so future payout would be pay par minus pv of coupon so I’m thinking it was B.

#16

thepinkman Wrote: ------------------------------------------------------- > FP = (So - PVD)*(1+RFR)^T > > or > > FP = So * (1+RFR)^T - FVD > > I figured that given only the par and market rate, > the market rate must be represneted be S0* > (1+RFR)^T > > MIght be overanalysing Thats how I did it too. I’m just unsure if So * (1+RFR)^t is the same thing as market price. If you were to subtract the PV of coupons, you would have to somehow figure out the risk free rate because you compound the spot rate net of coupons whereas under the FV of coupons method you compound the spot rate gross of coupons.

#17

According to Shweser it should be (So - PVD)*(1+RFR)^T One could get the (1+RFR)^T factor by dividing FVC / PVC. Though it yielded a higher dollar price than any alternative. Thus I marked (So - PVD), which was the only fitting choice, though it doesn’t make sense at all! This could clearly be a mistake by the institute.

#18

market value less PV of coupon x 1 + risk free rate to get the forward price

#19

golfer- that is right but i did the same thing that juanna did by finding RFR from PV and FV of coupons but still could not get the right answer

#20

I did an A on this