CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

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?

A. $9,998,195
B. $10,000,000
C. $10,001,805
Correct Answer: B

Repurchase price = original price x (1+m(r/360)) = $9,998,195 x (1+0.065/360) = $10,000,000

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
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