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27 October, 03:24

4. Titleist Corporation arranged a repurchase agreement in which it purchased securities for $3,750,000 and will sell the securities back for $3,780,000 in 50 days. What is the yield (or repo rate) to Titleist Corporation?

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  1. 27 October, 04:23
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    5.688%

    Explanation:

    Given that

    Purchase securities = $3,750,000

    Sale value of securities = $3,780,000

    Number of days given = 50 days

    So, the formula to compute the repo rate is shown below:

    Yield or repo rate is

    = (Sale value of securities - purchase price) : (Sale value of securities) * 360 days : 50 days

    = ($3,780,000 - $3,750,000) : ($3,780,000) * 360 days : 50 days

    = 0.0079 * 7.2

    = 5.688%

    W/e assume the 360 days in a year
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