Consider a T-bill maturing on 4/15/24 trading at the Bank Discount Rate YBDR = 1.07% for...

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Consider a T-bill maturing on 4/15/24 trading at the Bank Discount Rate YBDR = 1.07% for settlement on 10/15/23. Assume a face value of M = 100,000. Assume you arrange a weekly repo to partially finance your purchase of $10 million of face value of the T-bill. Assume a haircut of 5% and a repo rate of yMMY = 0.50%, on an MMY basis. Assume that at the same time as the far leg of the repo takes place, you settle on a sale of the T-bills, when they trade at the new Bank Discount Rate YBDR = 1.02%. Calculate the cash flows generated by the near and the far leg of the repo. Consider a T-bill maturing on 4/15/24 trading at the Bank Discount Rate YBDR = 1.07% for settlement on 10/15/23. Assume a face value of M = 100,000. Assume you arrange a weekly repo to partially finance your purchase of $10 million of face value of the T-bill. Assume a haircut of 5% and a repo rate of yMMY = 0.50%, on an MMY basis. Assume that at the same time as the far leg of the repo takes place, you settle on a sale of the T-bills, when they trade at the new Bank Discount Rate YBDR = 1.02%. Calculate the cash flows generated by the near and the far leg of the repo.

Answer rating: 100% (QA)

Lets break down the cash flows for both the near and far legs of the repo Near Leg Repo P... View the full answer