Consider a U.S. Treasury bond futures contract where the hypothetical deliverable bond has a coupon of 3.0%. At expiration of the futures contract, the short chooses to deliver a bond with a coupon of 3.8%. The conversion factor of this bond is most likely:
C is correct. If the short delivers a bond with a coupon greater than the coupon of the hypothetical deliverable bond, the conversion factor is greater than 1.