Question: Suppose a manager wants to borrow using a Treasury security she currently holds as collateral. The manager can enter a repo with a dealer firm

Suppose a manager wants to borrow using a Treasury security she currently holds as collateral. The manager can enter a repo with a dealer firm that would provide financing at a 10% repo rate. The repo term is 30 days and the nominal amount of the contract is USD100 million.

1. What is the dollar interest cost that the manager will have to pay for the borrowed fund?

2. How much does the manager borrow?

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