Funding Positions. As a junior trader at your investment bank, you quickly and cost-effectively need to fund overnight a $100m position in the on-the-run 5Y UST note. On Feb 17, 2014, this note, which pays a 3% coupon and matures on 03/21/2019, is quoted at a bid-ask of 100 21/32-22/32 (careful: what does the quote convention mean?).

1. At the expiration of the 1D repo (next day), the bond is trading at 100 22/32-23/32 (careful: what does the quote convention mean?). What is your total profit or loss if you were to close out your position?
2. As an alternative, you consider an overnight loan in the fed funds market. What are fed funds rates and how do they relate to repo rates? Explain.

(please see the attached screenshot, which listed all the needed info)

Benchmark Five-yea r Face Value 100 Settlement Date 2/17/14 Maturity Date 3/21/19 Coupon 3.00% YTM 2.856% Last Coupon Date 9/21/13 Next Coupon Date 3/21/14 Days Accrued 149 Basis 181 Interest Accrued 1.23480663 Clean Price 10065625 Dirty Price $101.89 Answer for part (b) Total Invoice price $101,891,056.63 Margin 2.00% Haircut $2,037,821.13 Net amount borrowed $99,853,235.50 Repo rate 1.25% Interest paid $3,467.13 Stake $2,034,354.01