Problem 5-14 (LG 5-2)

Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $34,950,000, with the promise to buy them back at a price of $35,000,000.

a. Calculate the yield on the repo if it has a 5-day maturity.

b. Calculate the yield on the repo if it has a 16-day maturity.

(For all requirements, use 360 days in a year. Do not round intermediate calculations. Round your percentage answers to 5 decimal places. (e.g., 32.16161))