(i) Ecobank holds ¢500 million T-Bill but is in short of cash. It needs cash to meet the requirement of a customer who has come to withdraw ¢400million.You have been asked to approach Barclays Bank to sell the T-Bill for ¢495 million with agreement to repurchase within 4 working days. (a) How much in cedis does Ecobank lose in this transaction (b) What is the Repo Rate on this transaction (ii) You have just been offered a commercial paper with a face value of ¢45,000,000 which bears a discount of 36% and has 182 days to mature. (a) How much will you be prepared to pay for this paper? (b) What is the cedi discount on the paper
You have been promoted to head of Treasury and Investment Management at Ecobank and
have been handed information on a number of issues for which immediate answers are
required. For each excerpt from the issues presented below answer the associated
question(s):
(i) Ecobank holds ¢500 million T-Bill but is in short of cash. It needs cash to meet
the requirement of a customer who has come to withdraw ¢400million.You
have been asked to approach Barclays Bank to sell the T-Bill for ¢495 million
with agreement to repurchase within 4 working days.
(a) How much in cedis does Ecobank lose in this transaction
(b) What is the Repo Rate on this transaction
(ii) You have just been offered a commercial paper with a face value of ¢45,000,000
which bears a discount of 36% and has 182 days to mature.
(a) How much will you be prepared to pay for this paper?
(b) What is the cedi discount on the paper?
(iii) Ecobank plans to issue a 2-year bond with a face value of ¢500,000,000 bearing
20% coupon rate. The market interest rate is 25%. The coupons are paid every
six months. You are to calculate the
(iv) An investor buys a 9% coupon bond at a price of ¢8,500,000 on 1st January 2016.
At 31st December 2016, he needed money to spend with his family in the new
year and thus sold the bond for ¢9,125,000. During the 12 months of holding
the bond, he received a coupon amounting to ¢765,000.
(a) Calculate the one-year holding period return on the bond for this investor
(b) What is the current yield on the bond
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