A ____ is an agreement to between two firms where one firm agrees to sell some of its financial assets to another and then buy the financial assets back from that firm at a later time
A) buy back
B) call option
C) repurchase agreement
D) put option

Question

Quizplus · Accepted Answer

A repurchase agreement, also known as a repo, is a common type of short-term borrowing in the financial markets. It involves one firm (the seller) selling some of its financial assets, such as stocks or bonds, to another firm (the buyer) for cash with an agreement to repurchase the assets at a later date for a slightly higher price. This transaction is essentially a collateralized loan, where the financial assets serve as collateral for the cash borrowed. The seller is essentially borrowing cash in exchange for collateral, with an agreement to repay the cash plus interest at a later date. The buyer benefits from earning interest on the cash lent, as well as having the security of the financial assets as collateral.

A ____ Is an Agreement to Between Two Firms Where