Series 7 - General Securities Representative Exam
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Which of the following best describes repurchase agreements?
Shorting a security at the present price with a predefined buy stop order to buy them back before a certain date in the future
A
The sale of securities with a contract to purchase the same securities back at a higher price by a specific future date
B
Short term unsecured promissory notes
C
Overnight borrowings between banks and other financial institutions to maintain their reserves at the Federal Reserve
D
Explanations
'The sale of securities with a contract to purchase the same securities back at a higher price by a specific future date' describes repos-repurchase agreements. 'Short term unsecured promissory notes' is commercial paper. 'Shorting a security at the present price with a predefined buy stop order to buy them back before a certain date in the future' is just a short stock order with a buy stop. 'Overnight borrowings between banks and other financial institutions to maintain their reserves at the Federal Reserve' are fed funds.