A Cash-And-Carry Arbitrage Is Not Risk Free Unless a Repo

question 7

True/False

A cash-and-carry arbitrage is not risk free unless a repo is available with a maturity equal to the entire life of the transaction.

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Definitions:

Treasury Stock

Shares that were issued and later reacquired by the issuing company, reducing the amount of stock in the market.

Issued Stock

The number of shares that have been allocated (sold or given) and are held by shareholders, including both public investors and company officers or insiders.

Outstanding Stock

The total shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.

Unlimited Liability

A legal structure in which the owners of a business are personally liable for all the business's debts, with no limit on the amount for which they can be liable.