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A security dealer plans to purchase $100 million of T-notes at the next auction. The...

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Finance

  1. A security dealer plans to purchase $100 million of T-notes at the next auction. The dealer anticipates holding the securities one day and plans to finance the purchase with an overnight repurchase agreement. Currently overnight repo rates are at 3%.
    1. Explain how the repurchase agreement would work in this case?
    2. Determine the dollar interest, selling price, and repurchase price on the repurchase agreement?
    3. What type of repurchase agreement would the dealer need if there was a possibility that it could take several days to sell the securities?

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