Mcqs on Repurchase Agreement
If you are looking for an article on "MCQs on Repurchase Agreement" then you are in the right place. In this article, we will be discussing some of the most important Multiple Choice Questions (MCQs) related to Repurchase Agreements.
Repurchase Agreement (Repo) is a financial tool where a party sells securities to another party and promises to buy back the same securities at a later date. The buyer of the securities is known as the "repo buyer" while the seller is known as the "repo seller". The repo rate is the interest rate at which the repo seller borrows funds from the repo buyer.
Here are some of the most important MCQs on Repurchase Agreements:
Q1. What is a Repurchase Agreement (Repo)?
a. A financial tool where a party sells securities to another party and promises to buy back the same securities at a later date.
b. A financial tool where a party buys securities from another party and promises to sell the same securities at a later date.
c. A financial tool where a party sells securities to another party and doesn`t promise to buy back the same securities at a later date.
d. None of the above.
Ans: a
Q2. What is the buyer of securities known as in a Repurchase Agreement?
a. Repo seller
b. Repo buyer
c. Security buyer
d. Security seller
Ans: b
Q3. What is the seller of securities known as in a Repurchase Agreement?
a. Repo seller
b. Repo buyer
c. Security buyer
d. Security seller
Ans: a
Q4. What is the interest rate at which the repo seller borrows funds from the repo buyer known as?
a. Repurchase rate
b. Sale rate
c. Purchase rate
d. None of the above
Ans: a
Q5. What happens to the securities during a Repurchase Agreement?
a. They are sold permanently to the repo buyer.
b. They are sold temporarily to the repo buyer and bought back at a later date.
c. They are not sold to the repo buyer.
d. None of the above.
Ans: b
Q6. What is the main advantage of a Repurchase Agreement?
a. It provides liquidity to the repo seller.
b. It provides liquidity to the repo buyer.
c. It provides no advantage to either party.
d. None of the above.
Ans: a
Q7. What is the main disadvantage of a Repurchase Agreement?
a. It is risky for the repo seller.
b. It is risky for the repo buyer.
c. It is not a disadvantageous for either party.
d. None of the above.
Ans: a
In conclusion, Repurchase Agreement (Repo) is an important financial tool used to provide liquidity to market participants. Understanding the basics of Repo is important for any finance student or professional. The above MCQs can be used as a quick reference to test your knowledge about Repo.