Question 4 10 marks a Yesterday the Hong Kong Monetary Autho

Question 4 (10 marks) (a) Yesterday, the Hong Kong Monetary Authority (HKMA) (6 marks) announced the tender results of the latest new issue of the Exchange Fund Bills (EFB). HMT Bank, one of the Eligible Market Makers (EMM) recognized by the HKMA, has been successfully allotted 120 units of the 182-days EFB. Assess the total settlement amount that the bank has to pay to the HKMA if the final bid yield of the issue is 2.62% pa. and each unit of EFB is in denomination of $500,000 Compare and contrast two differences between the Exchange Fund Bills (EFB) and the Exchange Fund Notes (EFN) issued by the Hong Kong Monetary Authority (HKMA). (b) (4 marks)

Solution

a) Final settlement amount = $ 500,000 * 120 * 2.62% * 182 / 365 ( assuming 365 days in a year)

= $ 783,846.58

b) Differences between EFB and EFN :