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Explanation:
The repurchase price is the sum of the original invoice price (principal) and the repo interest. Repo interest is calculated using the actual/360 day-count convention. The number of days between June 1st, 2015 and September 1st, 2015 is 92 days (29 days remaining in June + 31 days in July + 31 days in August + 1 day in September).
Interest = Principal × Repo Rate × (Days / 360)
Interest = $180,000,000 × 0.0090 × (92 / 360) = $414,000
Repurchase Price = Principal + Interest
Repurchase Price = $180,000,000 + $414,000 = $180,414,000.
Therefore, the correct answer is C.
513.1. At initiation of a repurchase agreement (repo), Counterparty A sells a security to Counterparty B for settlement on June 1st, 2015 at an invoice price of USD 180.0 million. At the same time, Counterparty A agrees to repurchase the security three months later, for settlement on September 1st, 2015, at a purchase price equal to the original invoice price plus interest at a repo rate of 0.90%. Using the actual/360 convention of most money market instruments, which is nearest to the repurchase price?
A
$414,000
B
$180,000,000
C
$180,414,000
D
$181,620,000
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