Question
1.) A company wants to borrow for 50 days in the money market. It sells a commercial paper issue with a par value of $10,000,000
1.) A company wants to borrow for 50 days in the money market. It sells a commercial paper issue with a par value of $10,000,000 for $9,931,035.
a.) What is the annualized money market yield on this commercial paper issue?
b.) Assuming reinvestment (and compounding of interest), what would be the true (effective annual yield)?
2.) A bank wants to borrow in the money market using a repurchase (repo) agreement. Explain how such a repo would be implemented/executed.
3.) A T-Bill with 90 days to maturity and a $10,000 face value has a Discount Yield of 5%. Using the Discount Yield formula, what would be the price of this T-Bill?
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