CFA Practice Question

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CFA Practice Question

A non-dealer borrowing funds through the overnight sale of securities is an example of ______.

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.
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