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. A church that a registered representative (RR) attends plans to raise the funds necessary ...

    The correct answer is c) Although church bonds are normally considered to be exempt securities, the RR is obligated, by NASD ...
  2. Which of the following statements is (are) true with respect to the calculation of ...

    The correct answer is: a) (I) is incorrect because results that cover a period of less than a year must "not" be annualized. ...
  3. Which of the following terms are associated with the purchase/redemption of open-end ...

    The correct answer is b. Forward pricing is the SEC Rule that requires all transactions in open-end investment company shares ...
  4. Joanne Bume, CFA, is the head of research at large brokerage firm ...

    The correct answer is: a) The proper course of action would simply be to place Universal Airlines on a restricted list until ...
RELATED TERMS
  1. No results found.

You May Also Like

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!