Cost of T-bill

by | Aug 25, 2021 | Assignment

1. T-bill: A brand new 270 day T-bill has an Asked price of 4.12. What is (a) the cost of the T-bill ($10,000 face); (b) the Ask Yld (BYE); (c) the effective interest rate; and, (d) the tax equivalent yield (assume your state tax rate is 8% and your federal tax rate is 28%)?2. Repos. You execute a three day $75 million (face value) Repo receiving $74,955,172.00 at t=0. What is (a) the associated bank discount rate and (b) the effective interest rate?3. Revolvers. A two year loan commitment has been authorized for $25,000,000 with an up-front fee of 80 basis points and a commitment fee, on the used portion, of 45 basis points. The rate charged is LIBOR + 175 BP, currently LIBOR is 4.5%. The line of credit requires compensating balances on a “4 + 6” basis for the line and any usage, respectively. Compensating balances on deposit would earn 1% and face a 5% reserve requirement. The expected first year line usage is 60%. What is (a) the bank’s expected yield; (b) the borrower’s percentage cost; and, (c) suppose the borrower desires no commitment fee, what would the front end fee need to be?

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