- CFA Exams
- CFA Exam: Level I 2021
- Study Session 14. Fixed Income (1)
- Reading 43. Fixed-Income Markets: Issuance, Trading, and Funding
- Subject 5. Short-Term Funding Alternatives Available to Banks

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**CFA Practice Question**

The repurchase rate is 5.40% on a loan of four days for which $100,000,000 par value of a bond is sold to the lender at par. What is the repurchase price?

B. $100,025,000

C. $100,060,000

A. $100,013,500

B. $100,025,000

C. $100,060,000

Correct Answer: C

Repurchase price = original price x (rate x (m/360)+1) = $100,060,000

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**User Contributed Comments**
7

User |
Comment |
---|---|

johntan1979 |
To be more accurate: $100,060,014 |

Fabulous1 |
Actually not. The price is exactly like stated in the answer as 5.4 % can be divided by 90 days... |

Inaganti6 |
Damn someone disagreed with. JohnTan |

khalifa92 |
true its exactly 100,060,000. |

sshetty2 |
why Are we using a 360 day yr here? |

unknown |
Always use 360 days for Repo. |

UcheSam |
It is better to use the Repurchase Rate formula than the present value approach as it produces exact answer e.g 100,060,000; also, given the proximity of the options at times. |