Question

Question 3 1 pts Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $24,995,000, with the promise to buy them back at a price of $25,000,000 in 14 days. What is the bond equivalent yield? 7.30% None of these is correct 5.22% 0.73% 0.52%

Answer 1

Getting the rate of interest for 14 days .

5000 / 24,995,000 =0.0002000400080 ( for 14 days )

Now convert it to 365 days to get the annual equivalent yield = 0.0002000400080 / 14 days *365 days = .00521

Now converting it into percentage = .522%

Answer ( option c )