In this video we calculate the quoted future price for a 6% Treasury bond. Using Treasury Direct data we pick a 20 year Treasury bond with a 4% coupon and known semi-annual coupon payment dates. We start with the quoted bond price and then add accrued interest to calculated the cash bond price. We then calculate the cash future price and subtract out accrued interest to calculate the quoted future bond price for a 4% coupon bond. Since Treasury bond futures are normalized to 6% Treasury bonds, we then use a Conversion Factor from the CME group site to calculate the equivalent quoted 6% future bond price. The example we use is similar to a problem out of the Hull, "Options Futures, and Derivatives" text chapter on Interest Rate Futures.
