The agreement which incurs the transaction between two parties and promise held that second party will sell security at specific maturity is classified as __________?
Correct answer: D. reverse repurchase agreement
- A. repurchasing commercial notes
- B. repurchase bills
- C. purchase agreement
- D. reverse repurchase agreement
Explanation
In a reverse repurchase agreement, one party buys a security and agrees to resell it to the other party at a specified future date. A normal repo is described from the seller’s perspective, who agrees to repurchase the security.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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