What is the effective annual rate

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Question - Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $24,995,000, with the promise to buy them back at a price of $25,000,000. Recall that, though different in structure, repurchase agreements can be qualified as single payment securities and so the same convention applies to them.

a. Calculate the yield on the repo if it has a 7-day maturity.

b. Calculate the bond equivalent yield for that 7-day maturity repo. 4.2 If the overnight Fed funds rate is quoted as 0.75 percent, what is the bond equivalent rate? What is the effective annual rate?

Reference no: EM132199647

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