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EXAMPLE 5-7 Calculation of a Yield on a Repurchase Agreement Suppose a bank enters a reverse repurchase agreement in which it agrees to buy fed
EXAMPLE 5-7 Calculation of a Yield on a Repurchase Agreement Suppose a bank enters a reverse repurchase agreement in which it agrees to buy fed funds from one of its correspondent banks at a price of $10,000,000, with the promise to sell these funds back at a price of $10,000,291.67 ($10,000,000 plus interest of $291.67) after five days. The yield on this repo to the bank is calculated as follows: EXAMPLE 5-7 Calculation of a Yield on a Repurchase Agreement Suppose a bank enters a reverse repurchase agreement in which it agrees to buy fed funds from one of its correspondent banks at a price of $10,000,000, with the promise to sell these funds back at a price of $10,000,291.67 (\$10,000,000 plus interest of \$291.67) after five days. The yield on this repo to the bank is calculated as follows
EXAMPLE 5-7 Calculation of a Yield on a Repurchase Agreement Suppose a bank enters a reverse repurchase agreement in which it agrees to buy fed funds from one of its correspondent banks at a price of $10,000,000, with the promise to sell these funds back at a price of $10,000,291.67 ($10,000,000 plus interest of $291.67) after five days. The yield on this repo to the bank is calculated as follows:
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