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Calculating Implied Annual Interest Rate

Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. The T-bond is a 20-year 6% coupon bond and the interest is paid semi-annually. What is the implied annual interest rate inherent in the futures contract?
a) 6.86
b) 7.22
c) 7.60
d) 8.00
e) 8.40

Solution Summary

The solution looks at calculating implied annual interest rates.