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    Implied annual interest rate

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    Suppose the current Treasury bond futures contract has a quoted price of 89-09. The terms of the contract are standard (20 years, 6% coupon paid semiannually). The implied annual interest rate on the contract is

    a. about 6 percent.
    b. about 12 percent.
    c. about 7.0 percent.
    d. about 14 percent.
    e. In fact, none of the answers is correct

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    Solution Preview

    The implied rate is the yield to maturity on the bond. The YTM is the discounting rate that will make the present value ...

    Solution Summary

    The solution explains how to calculate the implied annual interest rate