ch07 sol - CHAPTER 7 ANSWERS TO END-OF-CHAPTER QUESTIONS 1....

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CHAPTER 7 ANSWERS TO END-OF-CHAPTER QUESTIONS 1. Calculate the bond equivalent yield for a 180-day T-bill that is purchased at a 6% "ask" rate. If the bill has a face value of $10,000, calculate its price. First calculate the price of the T-bill using eq. 7.3 which is derived from eq. 7.1 in the text. 700 , 9 $ 300 000 , 10 $ 000 , 10 $ 360 180 06 . 0 000 , 10 $ 360 0 f d f P n y P P where P f is the face value ($10,000), y d is the bank discount rate (6%) and n is the number of days (180). The bond equivalent yield(y be ) uses the net amount of funds invested or price as the divisor and 365 days. (See eq. 7.2) % 27 . 6 % 100 180 365 700 , 9 $ 700 , 9 $ 000 , 10 $ % 100 365 0 0 n P P P y f be 8. Suppose Fargood Corporation engages in a repurchase agreement with The National Bank of Nebraska. In the agreement, Fargood sells $9,987,950 worth of Treasury securities to the bank and agrees to repurchase the securities in 30 days for $10,000,000. a.
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ch07 sol - CHAPTER 7 ANSWERS TO END-OF-CHAPTER QUESTIONS 1....

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