The two-week repo rate for the 5.25% bund 2007 is quoted to you at 3.33-38%. You agree to reverse in bonds worth EUR 266,125,000 with no initial margin. You would earn repo interest of:
A) EUR 349,806
B) EUR 344,632
C) EUR 319,315
D) EUR 324,110

Question

Quizplus · Accepted Answer

To calculate the earned repo interest, we need to use the following formula:

Interest = (Bonds value x Repo rate x Days) / 360

Days = 14 (two weeks)

Bonds value = EUR 266,125,000

Repo rate = (3.33 + 3.38) / 2 = 3.355%

Interest = (266125000 x 3.355 x 14) / 360 = EUR 344,632

Therefore, the answer is B.

The Two-Week Repo Rate for the 5