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Basic Question 3 of 9
A dealer who needs to finance an inventory of Treasury securities agrees to sell the securities to a lender for $9,998,195 and repurchase them the next day. The repo rate for this transaction is 6.50%. What is the repurchase price?
B. $10,000,000
C. $10,001,805
A. $9,998,195
B. $10,000,000
C. $10,001,805
User Contributed Comments 8
| User | Comment |
|---|---|
| danlan | Use 360 instead of 365 |
| gaur | i=6.5/360, PV:$9,998,195, n=1 Calculate for FV = 10,000,000 |
| Wheels | why do these calculations use 360 instead of 365? |
| mchu | assuming a 360-day year consisting of twelve 30-day months |
| Rotigga | Any government securities assume a 360-day year |
| gazelle | Thank you gaur for the shortcut! |
| fanfanli | 360 Day count is used since Repos are considered money market transactions and hence use money market assumptions |
| Renaud1807 | Thanks fanfanli very good explanation |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
describe repurchase agreements(repos), their uses, and their benefits and risks
CFA® 2024 Level I Curriculum, Volume 4, Module 4.