Answer:
For a. is 10.30% and for b. is 3.43%
Explanation:
To compute the Repo yield, the formula is used which is shown below:
= (Buy back Price - Purchase price ) ÷ Purchase Price × (360 ÷ given time period)
a. The computation of yield on the repo if it has a 7- day maturity is displayed below
= ($25,000,000 - $24,950,000) ÷ $24,950,000 × (360÷7)
= 10.30 %
b. The computation of yield on the repo if it has a 21- day maturity is displayed below
= ($25,000,000 - $24,950,000) ÷ $24,950,000 × (360÷21)
= 3.43 %
Assume, 360 days in a year
Thus, for a. is 10.30% and for b. is 3.43%
