Find the Annualized Implied Repo Rate on a T-Bond Arbitrage

question 8

Multiple Choice

Find the annualized implied repo rate on a T-bond arbitrage if the spot price is 112.25,the accrued interest is 1.35,the futures price is 114.75,the CF is 1.0125,the accrued interest at delivery is 0.95,and the holding period is three months.

• A)1.85 percent
• B)0.77 percent
• C)14.77 percent
• D)13.04 percent
• E)2.23 percent

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Definitions:

Functional Currency

The form of monetary exchange prevalent in the primary economic zone where an organization engages and creates cash flow.

Exchange Rate

The rate at which one currency can be exchanged for another currency, affecting international trade and investments.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.

Temporal Method

An exchange rate conversion method used in translating foreign currency financial statements, where monetary items are converted at the current exchange rate and non-monetary items at historical rates.