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Can someone help with my finace howmework probelm? On February 10th 2016, a dealer wants to finance the purchase of a $10 million par value
Can someone help with my finace howmework probelm?
On February 10th 2016, a dealer wants to finance the purchase of a $10 million par value Treasury bond that matures on January 15th 2036. The bond has a 7.25% coupon rate and pays coupons semiannually. The clean price on February 10th 2016 is $94.16. There is a haircut of 0.5% of the bond market value and the repo rate is 6%. The position is carried until February 13th 2016. Since market forces increase the price (clean) to $96.78, the dealer is happy to sell the security and make a profit. What is the dealer's profit? (Assume the dealer incurs no cost to fund the haircut)Step by Step Solution
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