Which of the following money market investments is essentially a loan arrangement wherein a securities dealer is the "borrower" and the investor is the "lender"? The investor buys securities from the securities dealer, with an agreement to sell the securities back to the dealer at a later date for a specified higher price.

Question

Quizplus · Accepted Answer

Repurchase agreement (repo) is a money market investment that acts as a loan arrangement between a securities dealer (the borrower) and an investor (the lender). In this agreement, the investor buys securities from the dealer and agrees to sell those securities back to the dealer at a later date for a specific higher price. The difference between the initial buying price and the selling price represents the interest earned by the investor.

Which of the Following Money Market Investments Is Essentially a Loan