is the loans dollar interest cost. Let us return now to the dealer who needs to finance the Treasury note that it purchased and plans to hold it overnight. We will illustrate this transaction using Bloombergs Repo/Reverse Repo Analysis screen (RRRA) that appears in Exhibit 8.1. The settlement date is the day that the collateral must be delivered and the money lent to initiate the transaction. Likewise, the termination date of the repo agreement is November 16, 2001 and appears in the lower left-hand corner. At this point we need to ask, who is the dealers counterparty (i.e., the lender of funds). Suppose that one of the dealers customers has excess funds in the amount of $1,044,843.75 labeled "SETTLEMENT MONEY" in Exhibit 8.1 and is the amount of money loaned in the repo agreement.2On November 15,   2For example, the customer might be a municipality with tax receipts that it has just collected and no immediate need to disburse the funds.     2001, the dealer would agree to deliver ("sell") $1,044,843.75 worth of Treasury notes to the customer and buy the same Treasury security for an amount determined by the repo rate the next day on November 16, 2001.3 Suppose the repo rate in this transaction is 1.83% which is shown in the upper right-hand corner of the screen. Then, as will be explained below, the dealer would agree to deliver the Treasury note for $1,044,843.75 and repurchase the same security for $1,044,896.86 the next day. The $53.11 difference between the "sale" price of $1,044,843.75 and the repurchase price of $1,044,896.86 is the dollar interest on the financing.   Repo Interest The following formula is used to calculate the dollar interest on a repo transaction:   dollar interest = (dollar principal) ´ (repo rate) ´ (repo term/360)     3Weareassuminginthisillustrationthattheborrowerwillprovidecollateralthat is equal in value to the money that is loaned. In practice, lenders require borrowers to provide collateral in excess of the value of money that is loaned. We will illustrate how this is accomplished shortly when we discuss repo margins.     Notice that the interest is computed using a day count convention of Actual/360 like most money market instruments. In our illustration, using a repo rate of 1.83% and a repo term of one day, the dollar interest is $53.11 as shown below:   $1,044,843.75 ´ 0.0183 ´ (1/360) = $53.11