CFA Practice Question

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CFA Practice Question

Which statement is TRUE?
A. The interbank market is the market of loans and deposits between banks. An interbank deposit is secured.
B. The principal disadvantage of commercial paper as a source of short-term financing is that it is generally more expensive than a short-term business loan from a commercial bank.
C. In a repo both parties face credit risk.
Explanation: A is false. The interbank market is unsecured. It is essentially based on confidence in the banking system.

B is false. Commercial paper is generally cheaper than a short-term business loan from a commercial bank.

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