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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. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
describe repurchase agreements(repos), their uses, and their benefits and risks
CFA® 2025 Level I Curriculum, Volume 4, Module 4.