- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 4. Fixed-Income Markets for Corporate Issuers
- Subject 1. Short-Term Funding Alternatives
CFA Practice Question
A non-dealer borrowing funds through the overnight sale of securities is an example of ______.
B. an overnight repurchase agreement
C. a reverse repurchase agreement
A. a term repurchase agreement
B. an overnight repurchase agreement
C. a reverse repurchase agreement
Correct Answer: B
For the party (borrower) selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement (lender).
User Contributed Comments 5
| User | Comment |
|---|---|
| BlueRose | What's wrong with B? |
| danlan | A and B don't apply to NON-dealers. |
| houstcarr | It doesn't matter whether a party to a transaction is a dealer or not. whoever is borrowing cash is doing a repo, whoever is lending is doing a reverse repo. |
| Albireo | How come the answer says B if the correct one is C? |
| breh | @Albireo: C is a reverse repo. |