Which of the following observations concerning repurchase agreements is NOT true?
A)They can be viewed as collateralized federal funds transactions.
B)The RP market is a highly liquid and flexible source of funds for DIs needing to increase their liabilities and to offset deposit withdrawals.
C)Unlike fed funds,these transactions cannot be rolled over each day.
D)It is difficult to transact an RP borrowing late in the day.

Question

Quizplus · Accepted Answer

Repurchase agreements can be rolled over each day. The borrower can choose to renew the agreement at the end of the term, usually one day or a few days, by paying the interest and the principal. This allows for a continuous source of funds for DIs. Therefore, C is the observation that is NOT true.

Which of the Following Observations Concerning Repurchase Agreements Is NOT