In a repurchase agreement, a corporation

Question

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In a repurchase agreement, also known as a repo, a corporation purchases Treasury bills or other securities from a bank with the agreement that the bank will repurchase them at a later date (usually the next day) for a slightly higher price. This can be seen as a short-term loan to the corporation, with the securities serving as collateral. Choice A is incorrect as a repurchase agreement involves the purchase and later repurchase of securities, not stock. Choice B is incorrect as it refers to a regular bank loan, not a repurchase agreement. Choice D is incorrect as it refers to a guarantee on goods, not a financial transaction.

In a Repurchase Agreement, a Corporation