Question Eighteen You have been presented with the information shown below which are excerpts from the records of Databank. You are required to provide answers to them: (i) Databank holds e460million T-Bill but it needs cash to settle an investor whose investment has matured and is expected to be paid &400 million. You have been asked to approach Ecobank to sell the T-Bill for &415 million on the morning of 19th May, 2008 with agreement to repurchase the bill on the evening of 23rd May, 2008. (a) What is the cedi cost of this transaction to Databank? (b) What is the Repo Rate on this transaction? (ii) You have just been offered a commercial paper with a face value of 92,000,000 which bears a discount of 25% and has 91 days to mature. (a) What is the cedi discount on the paper? (b) How much will you be prepared to pay for this paper? (iii) An investor buys a 12% coupon bond at a price of 10,500,000 on 1st January 2007. At 31 st December 2007, he sold the bond for /11,125,000. During the 12 months of holding the bond, he received the coupon on the bond. a) Calculate the one-year holding period return on the bond for this investor. b) What is the current yield on the bond? (iv) The results of Tender 1065 herd on 2nd tvay 2008 for Government of Ghana Securities show the rates for 91 Day and 182 Day Treasury Bills as follows: 9 Source: The Ghanaian Times, Monday May 5, 2008 Using the Discount Rates provided for the 91 Day Bill and 182 Day Bill, calculate their Interest Equivalent Rates indicated in the table with Question Marks (?). NOTE: DO NOT DRAW THE TABLE Question Eighteen You have been presented with the information shown below which are excerpts from the records of Databank. You are required to provide answers to them: (i) Databank holds e460million T-Bill but it needs cash to settle an investor whose investment has matured and is expected to be paid &400 million. You have been asked to approach Ecobank to sell the T-Bill for &415 million on the morning of 19th May, 2008 with agreement to repurchase the bill on the evening of 23rd May, 2008. (a) What is the cedi cost of this transaction to Databank? (b) What is the Repo Rate on this transaction? (ii) You have just been offered a commercial paper with a face value of 92,000,000 which bears a discount of 25% and has 91 days to mature. (a) What is the cedi discount on the paper? (b) How much will you be prepared to pay for this paper? (iii) An investor buys a 12% coupon bond at a price of 10,500,000 on 1st January 2007. At 31 st December 2007, he sold the bond for /11,125,000. During the 12 months of holding the bond, he received the coupon on the bond. a) Calculate the one-year holding period return on the bond for this investor. b) What is the current yield on the bond? (iv) The results of Tender 1065 herd on 2nd tvay 2008 for Government of Ghana Securities show the rates for 91 Day and 182 Day Treasury Bills as follows: 9 Source: The Ghanaian Times, Monday May 5, 2008 Using the Discount Rates provided for the 91 Day Bill and 182 Day Bill, calculate their Interest Equivalent Rates indicated in the table with Question Marks (?). NOTE: DO NOT DRAW THE TABLE
