Which of the Following Is True of a Repurchase Agreement

question 196

Multiple Choice

Which of the following is true of a repurchase agreement?

• A) It results from a bank guarantee of a business transaction; sold at discount from maturity value.
• B) It provides a return slightly below that obtainable through outright purchase of similar marketable securities.
• C) It is issued by professional portfolio management companies.
• D) Its maturity period lies between 1 to 10 years.

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Definitions:

Excess Reserves

The amount of reserves that banks hold over the minimum required by the central bank to back deposits.

Money Creation

The process by which the money supply of a country is increased through the activities of its central bank and commercial banking system.

Banking System

The network of banks and financial institutions that provide banking services, including deposits, loans, and currency exchange.

Required Reserve Ratio

The minimum percentage of deposits that a bank must hold in reserve and not lend out.