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. 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.

a. The yield on the repo if it has a 7-day maturity is 1.03%

b. The yield on the repo if it has a 21-day maturity is 0.34%

Explanation:

a. As per the information given in the question we have

Purchase price of treasury securities = $ 24,995,000

Repurchase price or Buy back price of treasury securities = $ 25,000,000

Maturity Period = 7 days

Applying the above values in the formula we have :

The formula for calculating the yield on repo is

= [ ( Repurchase price - Purchase price ) / Purchase price ] * ( 360 / Maturity Period )

= [ ( $ 25,000,000 - $ 24,995,000 ) / $ 24,995,000 ] * ( 360 / 7 )

= [ ( $ 5,000 ) / $ 24,995,000 ] * ( 360 / 7 )

= 0.0002 * 51.428571

= 0.010288

= 0.0103 ( when rounded off to four decimal places )

= 1.03 %

b. As per the information given in the question we have

Purchase price of treasury securities = $ 24,995,000

Repurchase price or Buy back price of treasury securities = $ 25,000,000

Maturity Period = 21 days

Applying the above values in the formula we have

= [ ( $ 25,000,000 - $ 24,995,000 ) / $ 24,995,000 ] * ( 360 / 21 )

= [ ( $ 5,000 ) / $ 24,995,000 ] * ( 360 / 21 )

= 0.0002 * 17.142857

= 0.003429

= 0.0034 ( when rounded off to four decimal places )

= 0.34 %

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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