CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading
A bank borrows €10,000,000 in a 30-day repo with a repo rate of 3.6% per year on a 360-day basis. The repurchase price is closest to:
The repurchase price is about €10,030,000. Interest equals €10,000,000 times 3.6% times 30/360, which is €30,000, and this is added to the amount borrowed to give the price at which the security is bought back.
- A€10,030,000Correct
- B€10,036,000
- C€10,360,000
Explanation
Interest = 10,000,000 × 0.036 × 30/360 = €30,000. Repurchase price = 10,000,000 + 30,000 = €10,030,000. Option B uses 30/300 or a wrong day count; option C uses a full year of interest.
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