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Basic Question 2 of 9
Slalom Brothers finances the purchase of $1,000,000 of a par value bond with a repurchase agreement. Bank of New York is the lending party in the repurchase agreement. Bank of New York agrees to purchase $1,000,000 par value of the bond at par from Slalom Brothers with a commitment to sell the same bonds back to Slalom Brothers two days later, for $1,000,250. What is the repurchase rate for this two-day loan?
B. 4.50%
C. 9.00%
A. 3.00%
B. 4.50%
C. 9.00%
User Contributed Comments 8
| User | Comment |
|---|---|
| o123 | 2 days!! |
| thekapila | I love this kinda financing... |
| chris12345 | I love finance |
| Saxonomy | Watch another bank by it from BNY on behalf of the brothers. |
| mfm102 | PV = -1,000,000 FV = 1,000,250 N = 2 CPT I/Y = 0.012499 * 360 = 4.4997 % = 4.5 % |
| abs013 | Why is it 360? |
| khalifa92 | money market yield |
| thevinu | @abs013 because the given interest is calculated for an year(360 days) and then you break it down to 2 days. |
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Learning Outcome Statements
describe repurchase agreements(repos), their uses, and their benefits and risks
CFA® 2025 Level I Curriculum, Volume 4, Module 4.