When the Fed does repos and reverse repos (or repurchase agreements) with ﬁnancial institutions, the collateral used in these transactions is
A) corporate stock.
B) municipal bonds.
C) government bonds.
D) certiﬁcates of deposits.

Question

Quizplus · Accepted Answer

The collateral used in repos and reverse repos with financial institutions is typically government bonds, specifically Treasury securities issued by the U.S. Department of the Treasury. This is because these securities are widely traded, highly liquid, and considered to be low risk. The Federal Reserve uses these transactions to manage the money supply, to provide liquidity to financial markets, and to influence short-term interest rates.

When the Fed Does Repos and Reverse Repos (Or Repurchase