Response to the following problem:
Suppose that a commercial bank wants to purchase $1 million of a bond for five days using a repurchase agreement to finance the purchase. Suppose further that the repo rate is 2.7%.
a. What is the dollar interest cost of borrowing?
b. What is the repurchase price?
c. What is the price that the commercial bank will sell the bond for to the lender in the repurchase agreement?