Podcast
Questions and Answers
What is a repurchase agreement (repo)?
What is a repurchase agreement (repo)?
- A sale of security with a commitment to buy back at a future date. (correct)
- A long-term loan without collateral.
- An agreement to purchase securities without selling them back.
- A short-term investment strategy without any security involved.
What does the difference between the purchase price and the sale price in a repo represent?
What does the difference between the purchase price and the sale price in a repo represent?
- Interest cost of the loan (correct)
- Security's market value
- Stock dividend value
- Insurance premium
What is the main reason for concern about default risk in repurchase agreements?
What is the main reason for concern about default risk in repurchase agreements?
- The collateral involved may lose value
- The length of maturity of the repo
- The creditworthiness of the borrower (correct)
- The interest rate fluctuation
What is the main difference between an overnight repo and a term repo?
What is the main difference between an overnight repo and a term repo?
In a reverse repo transaction, what does the corporation agreeing to buy the securities do next?
In a reverse repo transaction, what does the corporation agreeing to buy the securities do next?
How do repurchase agreements help increase liquidity in the money market?
How do repurchase agreements help increase liquidity in the money market?
'Fixed-income securities' are those that:
'Fixed-income securities' are those that:
Which type of collateral can be used in a repurchase agreement?
Which type of collateral can be used in a repurchase agreement?
How is repo rate calculated in a repurchase agreement?
How is repo rate calculated in a repurchase agreement?
What distinguishes a reverse repo from a standard repo?
What distinguishes a reverse repo from a standard repo?
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