Question

. If the overnight fed funds rate is quoted as 5.25%. What is the EAR? ) 5.25% B) 5.3229% C) 5.3899% D) 5.4667% 8. If a $10,000 par T-bill has a 3.75 percent discount quote and a 90-day maturity, what is the price of the T-bill to the nearest dollar? A) $9,625 B) $9,906 C) $9,908 D) $9,627 E) none of the options 79. Suppose a bank enters a repurchase agreement in which it agrees to buy T-bonds from a correspondent bank at a price of 24,900,000, with a promise to buy them back at a price of $25,000,000. What is the yield on the repo if it has a 15-day maturity? A) 9.64%

Answer 1

7.
EAR = 5.25 * (365/360)
= 5.25 * 1.0139
= 5.3229%

EAR = 5.3229%

8.

0.0375 / 90 = 3.375
Daily interest factor = 3.375 / 360
= 0.009375
Subtract 0.009375 from 1= 0.990625.
Price of the T bill = $10,000 * 0.990625
=$9906.25
Price of the T bill = $9,906.