Repurchase agreements are
A)long-term agreements to buy a government security that will then be sold back to the original seller.
B)long-term agreements to buy a corporate bond that will then be sold back to the original seller.
C)short term agreements in which the seller sells a government security with the simultaneous agreement to buy the security back at a higher price on a later date.
D)short-term agreements to sell a corporate bond that will then be bought back by the original buyer.

Question

Quizplus · Accepted Answer

Repurchase agreements, or repos, are short-term agreements in which the seller sells a security, typically a government security, with the simultaneous agreement to buy the security back at a higher price on a later date. The difference between the sale price and the repurchase price is the interest earned by the buyer of the security. This is a common tool used by banks and other financial institutions to manage their short-term liquidity needs.

Repurchase Agreements Are