Use the following information for the next 3 questions. (HINT: Treasury Futures and Repurchase Agreements7_4_7_5 Slides 3~7. Note that the PPT used in recording available on the course website provides more detailed information.)

Considering the following two bonds making semiannual coupon payments hat the short position in T-Note futures could choose to deliver:

Bond A: An 8-year bond (face value of $100) with a 5.5% coupon sells for $97.56. The bond would have a price of 96.86 if its yield were 6%.

Bond B: A 7% coupon bond (face value of $100) with exactly 8 years to maturity sells for a price of 103.71. The bond would have a price of 106.28 if its yield were 6%.

The observed T-Note futures price is 98.98.

Question 1

0 / 16.6 points

What is the invoice price if Bond A is chosen to be delivered?

Question options:

	The invoice price is 94.50 if Bond A is chosen to be delivered.
	The invoice price is 96.86 if Bond A is chosen to be delivered.
	The invoice price is 97.56 if Bond A is chosen to be delivered.
	The invoice price is 95.87 if Bond A is chosen to be delivered.

Question 2

0 / 16.6 points

What is the invoice price if Bond B is chosen to be delivered?

Question options:

	The invoice price is 110.22 if Bond B is chosen to be delivered.
	The invoice price is 106.28 if Bond B is chosen to be delivered.
	The invoice price is 105.20 if Bond B is chosen to be delivered.
	The invoice price is 103.71 if Bond B is chosen to be delivered.

Question 3

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Which bond is cheaper to deliver?

Question options:

	Bond B
	Bond A
	Both bonds yield the same result.

Question 4

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If the duration of the loan in a repurchase agreement is one day, the agreement is called ______________.

Question options:

	a term repo
	a haircut repo
	a collateral repo
	an overnight repo

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Question 5

0 / 16.6 points

The price of a 6-month T-bill is 98.20. You wish to enter into a repurchase agreement that provides for your purchase of a $100,000 bond in 7 days at a price of 99.05. What is the implied 7 day repo rate in this transaction?

Question options:

	0.87%
	0.29%
	0.73%
	0.64%

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Question 6

0 / 16.6 points

Which of the following is NOT true?

Question options:

	Repurchase agreements can be used as a form of financing or as a form speculative positions.
	A reverse repurchase agreement or a reverse repo entails selling a security with an agreement to buy it back at a fixed price.
	A repurchase agreement or a repo entails selling a security with an agreement to buy it back at a fixed price.
	A 2% haircut in the repurchase agreement would mean that a borrower repoing a security worth $102 would receive a loan of only $100.