Problem:
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $38,950,000, with the promise to buy them back at a price of $39,000,000.
Required:
Question 1: Calculate the yield on the repo if it has a 6-day maturity.
Question 2: Calculate the yield on the repo if it has a 18-day maturity.
Note: Be sure to show how you arrived at your answer.