An institutional investor agrees to buy Treasury notes from a securities dealer for $997,250,and promises to sell the securities back to the dealer in 4 days for $997,575.The yield on this reverse repo for the investor is:

Question

Quizplus · Accepted Answer

The yield on a reverse repo is calculated using the following formula:Yield = (Sale Price - Purchase Price) / Purchase Price * (360 / Days)In this case, the purchase price is $997,250, the sale price is $997,575, and the days are 4.Plugging these values into the formula, we get:Yield = (997,575 - 997,250) / 997,250 * (360 / 4)= 325 / 997,250 * 90= 0.0297= 2.97%Therefore, the yield on this reverse repo for the investor is 2.97%.

An Institutional Investor Agrees to Buy Treasury Notes from a Securities