Passlane Sign in

Ch.1 · Comparing Financial Products · hard

A Repo transaction in the money market involves:

0% of students got this wrong

EXPLANATION

In a Repo (Repurchase Agreement), the borrower sells securities to the lender with an agreement to buy them back at a specified future date and price. The difference between the sale and repurchase price represents the interest cost.

A.Two corporates exchanging fixed and floating rate interest obligations

B.The RBI issuing new government bonds to banks

C.A corporate placing surplus funds with a bank for a fixed interest rate

D.A bank borrowing funds by selling securities with an agreement to repurchase them at a future date [✓ Correct]

EXPLANATION

In a Repo (Repurchase Agreement), the borrower sells securities to the lender with an agreement to buy them back at a specified future date and price. The difference between the sale and repurchase price represents the interest cost.

Practising Chapter 1 one question at a time?

Try the full chapter — 50 questions, tracked score, weak area breakdown.

Practice Chapter 1 →Take the mock test →