Question: Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of $24,950,000, with the promise to buy them back at a price of $25,000,000. (LG 5-2)
a. Calculate the yield on the repo if it has a 7-day maturity.
b. Calculate the yield on the repo if it has a 21-day maturity.