Question
A broker repos USD 20 million in Treasury Bills (T-Bills).The haircut is 5%.The parameters of the operation are the following: Yield on Treasury bills:
A broker repos USD 20 million in Treasury Bills (T-Bills). The haircut is 5%. The parameters of the operation are the following: • Yield on Treasury bills: 2% • Maturity on Treasury bills: 90 days • Repurchase rate: 2.5%, term: 1 week
(a) How much cash does the dealer receive?
(b) How much interest will be paid at the end of the repo agreement?
Step by Step Solution
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Step: 1
To calculate the cash received by the dealer and the interest paid at the end of the repo agreement ...
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
