CFA CFA General Repurchase Agreement(REPO)

Repurchase Agreement(REPO)

Topic Resolution: Not Resolved
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    • Avatar of pranay95pranay95
        • CFA Level 1

        —Assume the following information about two banks.

        Bank A: has bond with face of $100 million, market value of 99,738,874 million

        Bank B: has cash to lend

        —Term of loan: 32 days

        —Repo rate (set by market): 1.67% (stated annually)

        Haircut required by Bank B: 2.83%

        Bank A and Bank B agree to engage in a repurchase agreement in which Bank A sells the bond to Bank B and agrees to later repurchase it.

        The amount of money that Bank B is willing to be repaid for the bond when Bank A repurchases it when the agreement expires is:  $____________ (rounded to nearest dollar).

        Can someone please answer this?

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