Question

You own $100,000 in Treasury Bills, and need a 10-day loan. If the repo rate is 6.5 percent, how much money can you raise?

Answer 1

To calculate how much money you can raise through a 10-day loan using your $100,000 Treasury Bills and a repo rate of 6.5 percent, you can use the formula: Raise Amount = Principal x (1 + (Repo Rate x (Number of Days Loaned / 360))). Plugging in the given values, the raise amount is $100,546.53.

Step-by-step explanation:

To calculate how much money you can raise through a 10-day loan using your $100,000 Treasury Bills, you need to understand the concept of a repo rate. The repo rate, or repurchase agreement rate, is the rate at which the central bank lends money to commercial banks for a short period. In this case, if the repo rate is 6.5 percent, it means that you can borrow money at a rate of 6.5 percent for 10 days.

To calculate the amount of money you can raise, you can use the formula:

Raise Amount = Principal x (1 + (Repo Rate x (Number of Days Loaned / 360)))

Plugging in the given values:

1. Principal = $100,000
2. Repo Rate = 6.5%
3. Number of Days Loaned = 10

Using this formula, you can calculate the raise amount to be $100,546.53.