# (Solved Homework): You are given the following data on 8/24/2015 settlement date: and the following data on 8/28/2015 settlement date: a) On…

You are given the following data on 8/24/2015 settlement date: and the following data on 8/28/2015 settlement date: a) On 8/24/2015, open a repo position using the 8/31/2017 maturity bond and close the position on 8/28/2015. Compute the profit/loss on this transaction. b) On 8/24/2015, open a reverse repo position using the 8/15/2025 maturity bond and close the position on 8/28/2015. Compute the profit/loss on this transaction. Use an annual repo rate of 1.0% and an annual reverse repo rate of 1.5%. Explain why you made a profit/loss in each of the above transactions. Also, make sure to account for accrued interest in your calculations and choose the bid or ask price appropriately. If you are using the Excel function for accrued interest, make up an Issue Date as the coupon payment date just prior to the settlement date.

## Expert Answer

1. Repo Position Gain/loss:

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 Sl Particulars Calculation Amount A. Sell security at Bid Price 102.4922 B. To be purchased at 102.4922*1%*7/365+102.4922 102.5119 C. If I purchase on 8/28 Ask Price 102.2031 D. Loss on security B-C 0.308756 E. intrest income 102.4922*1.875%*4/365 0.02106 F. Net loss on security D-E 0.287696

b. Reverse Repo positionGain/loss

 Sl Particulars Calculation Amount A. Buy security at Ask Price 144.6875 B. To be sold at 144.6875*1.5%*9/365+144.6875 144.7410 C. If I sold on 8/28 Bid Price 142.4531 D. Gain on security B-C 2.2879 E. intrest loss 144.6875*6.875%*13/365 0.354286173 F. Net gain on security D-E 1.933628382

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