FRM Part II · FRM Exam Part II · Managing Nondeposit Liabilities
A dealer sells USD 50 million of Treasury securities under a 7-day repurchase agreement at a repo rate of 3.60% (actual/360). What is the approximate repurchase price the dealer must pay at maturity?
The dealer repays USD 50,035,000. Interest is principal times rate times days over 360, which is 50 million × 3.60% × 7/360 = USD 35,000, added to the USD 50 million cash received at the start of the repo.
- AUSD 50,035,000Correct
- BUSD 50,350,000
- CUSD 50,000,000
- DUSD 50,180,000
Explanation
Interest = 50,000,000 × 0.036 × 7/360 = 35,000. Repurchase price = 50,035,000. Using 360/7 incorrectly or a 1-year rate (350,000 error) would give the wrong values, and option 50,180,000 uses 36 days.
Did you get it right without looking?
One question tells you little. A timed set on Managing Nondeposit Liabilities shows your real accuracy, how long you take and where you lose marks.
More Managing Nondeposit Liabilities questions
- A bank has USD 600 million of commercial paper maturing within 30 days, backed by a committed liquidity facility that it wants to use as a b…
- A bank issues a USD 50 million negotiable CD at a 4.00% annual rate and simultaneously buys federal funds at 4.20% for the same term. A trea…
- A bank wants to reduce its dependence on any single wholesale provider. Which policy best supports funding diversification for nondeposit li…
- A bank's treasury wants to reduce rollover risk in its wholesale funding. Which action would most effectively achieve this?
- A bank treasurer sees that 60% of the bank's wholesale funding comes from three money market funds. Which metric would best quantify this co…
- A bank relies on overnight unsecured interbank borrowing to fund a large portion of its balance sheet. Which action best reduces its roll-ov…