In this workout, we are asked how much is the repo interest in an overnight repo transaction? Well, let's have a look at this screenshot we've got here.

We're told in the top left hand corner that we've got a government bond and it's maturing on the 31st, the third month, 2025.

We're also told the overnight repo transaction will have a settlement date of April the 11th, 2023.

So we're dealing with a bonds that's nowhere near maturity yet.

We're then told that there's an repo interest rate of 4.99%, and again, we can see that from the screenshots.

Let's put some of this information into the answer already.

So it was 11th of April, 2023 for settlement.

Now the nominal amounts we're told again, the screenshot, the face amount, a thousand million.

Let's put that in as 1 million. There we go.

Now the next thing we were told in the text, the clean price of the treasury used as collateral is 99-25 and three quarters.

So I can tell that that's a US government bond because it's been priced instead of decimal places.

Then you priced with 25 30 seconds.

So if we put the price in here as a decimal, instead I'll say equals 99 plus, and then I need 25 and three quarters.

So 25.75, but then I'll divide that by 32, and as I press enter the figure, I get 99.8046875.

That's exactly the same as the settlement price given in the screenshots.

We were then told in the question that the accrued interest per 100 par is, so let's put that accrued interest in here.

So 0.1164617.

So I can now calculate the all in price, and that will be the sum of the two cells above.

So now I can calculate the borrowed amount.

We know the bond has a nominal value of 1 million, but we're nowhere near maturity date yet.

The price is something different.

So what I'm going to multiply that by the all-in price, divide it by 100, and we get the borrowed amount.

So I'm going to put up my bond in a repo as collateral.

The amount of money I'll be able to borrow is $999,211.50.

Amazing. Now the repo rate given in the question was 4.99%, but that will be for a whole year. And our term is just overnight. So I'm just going to put term one determination. Date is going to be the settlement date plus 1.

And now I can finally calculate my repo interests.

So my repo interest is going to be the borrowed amount, multiply that by the repo rate, but now I need to then multiply that by 1, divided by the number of days in the year.

And we're told in the question the US repo market uses an actual over 360 convention. So I'll divide this by 360. Great.

And there's my repo interest.

So initially I borrowed $999,211.50.

I'm then going to repay that same amount plus the repo interest, giving me a total repaid amount of 999,350.