Compute the profit and loss from only the repo transaction

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Reference no: EM131848507

The Fed is expected to increase the target federal funds rate. This will tend to flatten the yield curve. With this in mind, please answer the following questions. You are given the following data: Settlement Date: 12-Sep-17 Repo Rate: 3% Reverse Repo Rate: 3.5% 14-Sep-17 2-year 10-year Coupon 3% 5.50% Maturity 31-Aug-19 15-Aug-27 Clean 100.0391 102.1534 Issue date 31-Aug-19 15-Aug-27 19-Sep-17 2-year 10-year Clean 99.9295 103.1450 A). Compute the yields on the above bonds on 14-Sep-17 and 19-Sep-17. B). Compute the invoice price of each bond on 14-Sep-17 and 19-Sep-17. C). Which of these bonds will you use for the Repo transaction? Which one will you use for the Reverse Repo transaction? D). Compute the profit/loss from ONLY the Repo transaction. E). Using a graph explain the change in the yield curve from 14-Sep-17 and 19-Sep-17.

Reference no: EM131848507

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