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If the spot price for an asset is $95 and the quoted implied repo rate is 4.52%, assuming the asset has no storage costs, no
- If the spot price for an asset is $95 and the quoted implied repo rate is 4.52%, assuming the asset has no storage costs, no income and no convenience yield, what is the forward price for the asset in one year?
- $90.89
- $94.48
- $96.91
- $97.85
- $99.29
- If the actual repo rate for the asset above is 3.75%, how would an arbitrager go about making a risk-free profit?
- He would borrow at the risk-free rate to buy the forward position.
- He would lend at the risk free rate and short the asset.
- He would short the asset, buy the forward and lend in the repo market.
- He would buy the asset, sell the forward and borrow in the repo market.
- There is no opportunity for arbitrag
- In the repo markets a haircut is:
- The rate you need to pay to borrow against the asset.
- The excess value of the collateral versus the loan as a percentage of the collateral.
- When markets become volatile its the change in borrowing costs against the collateral.
- The difference between rates on overnight repo and term repo.
- The difference between the implied repo rate and the actual repo rat
Please provide an explanation to the answers
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