A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?
A) reverse repurchase agreement
B) bankers' acceptance
C) commercial paper
D) repurchase agreement

Question

Quizplus · Accepted Answer

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a firm sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price. This is a common way for firms with large securities holdings to raise money quickly and is typically cheaper than other forms of short-term financing because it is secured by the government securities.

A Firm That Has Large Securities Holdings and Wishes to Raise