The agreements under which the reporting entity purchases securities and simultaneously agrees to resell the same or substantially the same securities at a stated price on a specified date are called:

Question

Options

• ARepurchase agreements
• BTreasury bills
• CCollateralized bills
• DRevised agreements

• A
  83% (19)
• B
  4% (1)
• C
  9% (2)
• D
  4% (1)

Explanation

Repurchase agreements (repos) perfectly describe this arrangement: one party sells securities and contractually agrees to buy them back at a set price on a set date, effectively using the securities as collateral for a short-term loan. B (Treasury bills) are short-term government debt instruments - they are a type of security that might be used in a repo, not the agreement structure itself. C (Collateralized bills) is not a standard financial term; while repos are collateralized, this label doesn't exist as a defined instrument. D (Revised agreements) is a distractor with no meaning in this context - "revised" implies modification of an existing deal, not a specific financing structure.

Memory tip: Think of "repo" as a promise to re-purchase - the "re-" in repurchase is the key. The seller is always planning to take the securities back, which is the defining feature of the agreement.

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