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SVEN [57.7K]
3 years ago
8

Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price

of $38,950,000, with the promise to buy them back at a price of $39,000,000.a.Calculate the yield on the repo if it has a 6-day maturity. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Yield on the repo %b.Calculate the yield on the repo if it has a 18-day maturity. (Use 360 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Business
1 answer:
Cloud [144]3 years ago
3 0

Answer:

Yield with 6-day maturity is 7.70%

Yield with 18-day maturity is 2.57%

Explanation:

The formula for yield on repurchase is given as:

y = ( PAR – P ) / P x (360 / t )

P=Purchase price

PAR=Repurchase price

t= number of days of the transaction

In first scenario,PAR is $39 million,P is $38.95 million and t=6

y=($39000000-38950000)/38950000*(360/6)

y=7.70%

In the second scenario,details remained the same except for t that is 18

y=($39000000-38950000)/38950000*(360/18)

y=2.57%

This implies the longer the maturity the lesser the yield since yield is computed on daily basis.

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Vaselesa [24]

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to assist the low income at a cost to society, in convenient, affordable housing.

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4 0
3 years ago
Merger Co. has 10 employees, each of whom earns $1,700 per month and has been employed since January 1. FICA Social Security tax
andriy [413]

Answer:

Date            Description                                         Debit                    Credit

March, 31     Payroll Tax expense                       $‭2,320.5‬0

                    FICA Social Security taxes                                             $1,054

                    FICA Medicare taxes                                                      $ 246.50

                    FUTA taxes                                                                      $ 102

                    SUTA taxes                                                                      $ 918

<u>Working </u>

FICA Social Security taxes = 1,700 * 10 * 6.2% = $‭1,054‬

FICA Medicare taxes = 1,700 * 10 * 1.45% = $‭246.5‬0

FUTA Taxes = 1,700 * 10 * 0.6% = $‭102‬

SUTA Taxes = 1,700 * 10 * 5.4% = $‭918‬

Payroll Tax expense = 1,054 + 246.50 + 102 + 918 = $‭2,320.5‬0

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