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FRM Part I · FRM Exam Part I · Interest Rate Futures

A short futures position delivers $100,000 face value of a Treasury bond. The settlement futures price is 110-00, the bond's conversion factor is 0.9000, and accrued interest is 1.50 per $100 of face value. What invoice amount does the short party receive?

The short party receives $100,500. The invoice equals the futures settlement price times the conversion factor, plus accrued interest: 110 × 0.9 = 99.00, plus 1.50 gives 100.50 per $100 of face value. For $100,000 face value this is $100,500.

  1. A$99,000
  2. B$111,500
  3. C$100,500Correct
  4. D$123,722

Explanation

Cash received = futures settlement price × conversion factor + accrued interest. This is 110 × 0.9000 + 1.50 = 99.00 + 1.50 = 100.50 per $100. On $100,000 face value the invoice is $100,500. Omitting accrued interest gives $99,000.

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