Carter Bank is thinking about making a $1,000 loan via purchasing or taking a long position on a 3-year bond with an annual coupon rate of 8%.

i. Taking the long position in Alexs 3-year bond (loan) requires Carter Bank to acquire the cash funds by offering 1-year certificates of deposits, paying its depositors 4%. Based upon your answer in part d, what is Carter Banks net yield of the lending spread after year 1 of making the loan? j. Name the risk assumed by entities holding lending spreads if the yield curve rotates or inverts. k. Carter Bank, currently paying 4% to its customers with 1-year certificates of deposits, wants to lock in the 4% short-term borrowing rate for years 2 and 3. One way to do this would be to use a repo and lock in a futures price. Suppose Carter Bank is currently holding a U.S. Treasury bond with a 3% coupon that can be used as collateral for a repo agreement. If Carter shorts its Treasury bond and longs a futures contract at $1,025, what is the implied repo rate (rREPO)? SHOW YOUR WORK. l. Based upon your answer in part k, explain the financial risk(s) the counterparty that would enter into a repo transaction with Carter Bank would be attempting to receive compensation for.