A customer gives you GBP 25 million at 6.625% same day for 7 days. Through a broker, you place the funds with a bank for the same period at 6.6875%. Brokerage is charged at 2 basis points per annum. What is the net profit or loss on the deal?
A) Profit of GBP 299.66
B) Profit of GBP 203.77
C) Loss of GBP 299.66
D) Loss of GBP 203.77

Question

Quizplus · Accepted Answer

The interest earned on placing GBP 25 million at 6.6875% for 7 days = (25,000,000 * 6.6875% * 7/365) = GBP 34,760.27
The interest to be paid to the customer at 6.625% for 7 days = (25,000,000 * 6.625% * 7/365) = GBP 34,556.5
Brokerage charged for 7 days = (25,000,000 * 2 basis points * 7/365) = GBP 958.9
Net profit = 34,760.27 - 34,556.5 - 958.9 = GBP 203.77

A Customer Gives You GBP 25 Million at 6