What are overnight reverse repurchase agreements?
A)government-issued bonds that the Treasury Department sells to the Federal Reserve
B)the issue of discount window loans to financial institutions, with an agreement for the financial institutions to pay back the loans the next day
C)the demand and supply of overnight loans in the overnight loan market
D)the sale of government bonds to financial institutions, with an agreement to purchase the bonds back the next day, at a higher price

Question

Quizplus · Accepted Answer

Overnight reverse repurchase agreements involve the sale of government bonds by financial institutions to another party, with an agreement to repurchase the bonds the next day at a higher price. This is essentially a short-term loan, where the government bonds are used as collateral. The party purchasing the bonds is the one providing the loan.

What Are Overnight Reverse Repurchase Agreements