Which one of the following statements is true of repurchase agreements?
A) Their initial maturity is greater than 1 year.
B) They are an unsecured form of borrowing.
C) U.S. Treasury securities serve as their collateral.
D) They make explicit, rather than implicit, interest payments.

Question

Quizplus · Accepted Answer

Repurchase agreements involve the sale of securities with an agreement to repurchase them at a later date. U.S. Treasury securities typically serve as the collateral for these agreements. The initial maturity can vary, but is usually less than one year. Interest payments may be either explicit or implicit, depending on the terms of the agreement. Option A is incorrect since the initial maturity is typically less than a year. Option B is also incorrect as they are secured form of borrowing. Option D is incorrect since interest payments can be either explicit or implicit.

Which One of the Following Statements Is True of Repurchase