- CFA Exams
- CFA Exam: Level I 2021
- Study Session 14. Fixed Income (1)
- Reading 43. Fixed-Income Markets: Issuance, Trading, and Funding
- Subject 5. Short-Term Funding Alternatives Available to Banks
CFA Practice Question
The overnight repurchase rate for special collateral is 5.50%. For a dealer seeking financing using general collateral, the repurchase rate agreed to ______.
B. will be equal to or less than 5.5%
C. The dealer will not be able to borrow using general collateral.
A. will be greater than 5.5%
B. will be equal to or less than 5.5%
C. The dealer will not be able to borrow using general collateral.
Correct Answer: A
Because general collateral is not desirable beyond its purpose as collateral for the repurchase agreement, lenders will require higher repurchase rates to lend to borrowers in possession of general collateral.
User Contributed Comments 1
| User | Comment |
|---|---|
| khalifa92 | special collateral -> high demand -> high liquidity -> lower repo rate -> lower repo margin |