A repo is a collateralized, typically overnight loan structured as a sale of securities with an agreement to repurchase them at a set price.
How it works
Principal times the repo rate, times days divided by 360, gives the interest cost. Adding that to the principal gives the repurchase price.
What this does not include
This computes the interest cost alone — actual repo transactions also involve collateral haircuts (the collateral posted exceeds the cash borrowed by a margin) that this calculator doesn’t model.
How to use this calculator
- Enter the principal amount, repo rate, and term in days.
A worked example
A $10,000,000 overnight repo at a 5% rate for 1 day: interest = principal × rate × (days/360) = $1,388.89, repurchase price = $10,001,388.89.
What the variables mean
| Variable | Meaning |
|---|---|
| Principal | Amount of the repurchase agreement |
| Repo rate | Annualized interest rate on the agreement |
| Days | Length of the repo, often just overnight |
Edge cases worth knowing
This uses a 360-day convention, not 365 — standard practice in money markets, which slightly overstates the daily rate compared to a calendar-day convention.
Zero days makes the interest zero, a degenerate but valid case the calculator declines to show since there’s no meaningful overnight period to price.
Frequently asked questions
Who uses the repo market?
Banks, broker-dealers, money market funds, and the Federal Reserve itself all use repos extensively to manage short-term cash and liquidity needs.
Why is repo interest calculated on an actual/360 basis?
It’s the standard money-market convention, distinct from the 30/360 convention many bonds use — the actual number of days elapsed is used, but divided by a 360-day year.
What happens if the borrower can’t repurchase the securities?
The lender keeps the collateral securities — the collateralized structure is exactly what makes repo a relatively low-risk, low-cost form of short-term financing.
