You have been promoted to head of Treasury and Investment Management at Ecobank and have been handed information on a number of issues for which immediate answers are required. For each excerpt from the issues presented below answer the associated question(s):

(i) Ecobank holds 500 million T-Bill but is in short of cash. It needs cash to meet the

requirement of a customer who has come to withdraw 400 million. You have been asked to approach Barclays Bank to sell the T-Bill for 495 million with agreement to repurchase within 4 working days.

(a) How much in cedis does Ecobank lose in this transaction

(b) What is the Repo Rate on this transaction?

(ii) You have just been offered a commercial paper with a face value of 45,000,000

which bears a discount of 36% and has 182 days to mature.

(a) How much will you be prepared to pay for this paper?

(b) What is the cedi discount on the paper?

(iii) Ecobank plans to issue a 2-year bond with a face value of 500,000,000 bearing

20% coupon rate. The market interest rate is 25%. The coupons are paid every six

months. You are to calculate the price of this bond.

(iv) An investor buys a 9% coupon bond at a price of 8,500,000 on 1st January 2016.

At 31st December 2016, he needed money to spend with his family in the new year and thus sold the bond for 9,125,000. During the 12 months of holding the bond, he received a coupon amounting to 765,000.

(a) Calculate the one-year holding period return on the bond for this investor

(b) What is the current yield on the bond?