Q:

Which of the following statements least accurately describes the characteristics of futures contracts on Treasury bonds?
a) The Treasury bond futures contract requires the delivery of a Treasury bond with a maturity exceeding 15 years from the time that the futures expires.
b) The amount paid by the long position at expiry of the contract is equal to the futures price times a conversion factor that's dependent upon the bond that's being delivered.
c) The coupon rate is irrelevant in determining the eligibility of a bond's deliverability.
d) The fact that any number of bonds may be delivered to fulfill a futures contract is an advantage to the long position.

A:

The correct answer is: d)
The fact that any number of bonds may be delivered to fulfill a futures contract is an advantage to the SHORT position, because this would imply that the short will deliver the bond that cost her the cheapest.
2006 CFA Level 1 LOS: 16.71.k


RELATED FAQS

  1. Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although ...

    The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
  2. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  3. According to SEC Release IA-1092, which of the following would NOT qualify as an ...

    The correct answer is C). SEC Release IA-1092 considers financial planners, pension consultants and sports and entertainment ...
  4. Your client, Todd, owns 100 shares HAT stock in his taxable stock portfolio ...

    The correct answer is a): Since Todd owns the stock and expects another stagnant year ahead, he would employ a covered call ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!