The Rate of Return on a Repo Is

question 21

Multiple Choice

The rate of return on a repo is

• A)determined by the rate of return on the underlying collateral.
• B)strongly affected by the current Fed funds rate at the time of the repo.
• C)determined at the time of the repo.
• D)determined by the rate of return on the underlying collateral and determined at the time of the repo.
• E)strongly affected by the current Fed funds rate at the time of the repo and determined at the time of the repo.

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Definitions:

Restrictive Covenants

Provisions in a contract or loan agreement that limit the borrower's actions, intended to protect the lender by maintaining the borrower's creditworthiness.

Call Provision

A clause in a bond contract that allows the issuer the right to redeem the bond before its maturity date under specific conditions.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer, often used in the calculation of interest payments and dividends.

Coupon Rate

The annual interest rate paid by a bond expressed as a percentage of the bond's face value.