A Bond Is Trading 50 Basis Points Special for 1

question 6

Multiple Choice

A bond is trading 50 basis points special for 1 week, while the 1-week GC repo rate is 3.25%. If you held GBP 10,500,000 of this bond, what would be the cost of borrowing against it in the repo market?

• A) GBP 7,551.37
• B) GBP 6,544.52
• C) GBP 5,537.67
• D) GBP 1,006.85

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Definitions:

Monthly Payment

A regular payment made each month, usually in the context of loan repayments or leasing arrangements.

Compounded Annually

A calculation of interest where the interest earned over a period is added to the principal, and the total becomes the principal for the next computation period on a yearly basis.

Withdrawal

The act of removing funds from a bank account, investment, or retirement savings.

Future Value

The projected value of an investment or a sum of money based on a specified rate of growth or interest rate over a defined period.