An investor enters into the following repo transaction: he lends Eur1 million of the 10-year benchmark bond (i.e., the bond with 5% annual coupon rate with a quoted price of 105, on 10/31/2001) over 1 month(30 days) at a repo rate of 4%. There is 100 days accrued interest as of the starting date of the transaction. (Use Actual/360 day count basis)

(a) What is the amount of cash he received at the beginning of the contract? What is the amount of cash he has to pay at the end of the transaction?

(b) How could an investor finance a long position of Eur1 million bond with coupon 5% use the above repo transaction? What is his net gain/loss per day?

(c) How could an investor finance a short sale of Eur 1 million bond with coupon rate 5% in the repo market?