Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral?

Question

Quizplus · Accepted Answer

A repurchase agreement (also known as a repo) is a short-term loan where banks borrow funds from firms or other banks using the value of underlying securities as collateral. The borrower agrees to repurchase the securities at a higher price at a later date. This is a common way for banks to manage their short-term liquidity needs. Federal funds involve banks lending overnight funds to other banks, counterparty lending involves lending between two parties in a derivative transaction, and a money market account is a type of savings account that typically has a higher interest rate and more restrictions on withdrawals. None of these options involve banks borrowing funds from firms or other banks using the value of underlying securities as collateral.

Which of the Following Involves Banks Borrowing Funds from Firms