Question re: accrued interest on bond futures

Am hoping someone can help me understand why we don’t deduct AI at expiry when calculating bond futures price in the following problem.

I understand that there’s no AI at time of entering the contract. But at time of expiry, i.e., 8 months from now, there should be AI of $3,500 * (2/6), since 2 months will have elapsed since the latest coupon payment.


We note the following information for the cheapest to deliver US Treasury bond for the contract; the bond has a face value of $100,000, pays a 7% semiannual coupon, and matures in 15 years. The bond is priced at $156,000, has no accrued interest, and a yield of 2.5%. The futures contract expires in 8 months, and the annualized risk-free rate is 1.5%. There are multiple deliverable bonds, and the conversion factor for this bond is 1.098.

Q. Based on the information provided, the price of the bond futures contract is closest to:

A. 141,234

B. 140,298

C. 146,689


The official answer is B, and I don’t understand why accrued interest isn’t deducted at time T.

I have come across the same conceptual challenge. The answer that I have come across is in the below post’s last topic of "bond prices and accrued interest.

Basically, bond prices are quoted by dealers without the accrued Interest. I had thought that I would have to add the accrued interest in order to calculate the forward price but since the bond is quoted without the accrued interest hence the forward price calculation would be without it. Can someone else confirm my understanding?

I’m also a little confused why the accrued interest in that formula is discounted by the conversion factor. on the CME documents for delivery mechanisms this isn’t how it works and I think it may be incorrect. There is also another question in that same set that mentions the conversion factor being unrelated to accrued interest.

The lack of consistency here is pretty annoying.

I just built an interest rate future model for work and I’m 90% sure you’re right that there would be 2 months of accrued interest that should be taken into account.

Bond coupon : 7% (semiannual)
Current Bond price : 156,000 with no accrued interest
Futures contract expired in : 8 months

Given no accrued interest, I suppose the coupon is just paid and hence AI(0)= 0. (am I correct ?)
With Futures contract expires in 8 months, the expiration date should be in between 2 coupon payment dates :
C2 & C3
So, I would have thought AI(T) should be estimated (Coupon x 2/6) since there is 1x coupon (ie C3) at 6 months time will be accrued after the coupon payment C2
However, the answer given is not even taking this AI(T) into account.

May I know why ?

I never received a satisfactory answer to the question of why we don’t consider AI(T). Going into the exam, I assumed that CFAI’s official answer here was incorrect as it wasn’t consistent with the in-text examples.

Hello, I’m pretty much confused about the Bond futures valuation.
Can someone please explain to me the difference between the (1) accrued interest since the last payment and (2) the accrued interest at futures contract expiration.
I got the fact that we should add the (1) to compute the full price, but I wish to know the logic behind subtructing AI at futures expiration to compute the FP:

FP= full price (1+Rf)^T - AI - FVC
Where full price = clean price + accrued interest since the last coupon payment.

Thank you so much