Problem
1. If a bond dealer bought a $100 000 semi at 90 per cent of par and sold it at 93 per cent of par, how - much money did the dealer make on the bid-ask spread?
2. Suppose the simple interest formula tells us that the (annualized) overnight repo rate is 4.75. What is the real annual rate of return for entering into an overnight repo lending Cash every day? (Assume that you can enter into a repo on all 365 days of the year.) Why is this higher?