Question
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A) 4 percent. (1) 5 percent. C) ( percent. D) 9 percent. 12) Govemment securtios dealeri frequently engage is repos to A) manage liquidity. 1) take advantage of anticipated changes in interest rates. C) lend or borrow for a day or two with what is essentially a collateralized loan. D) do all of the above,

Ask by Mejia Zimmerman. in Saudi Arabia
Mar 09,2025

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Answer

Government securities dealers engage in repos to manage liquidity, take advantage of interest rate changes, and lend or borrow short-term with collateralized loans. So, the correct answer is D) do all of the above.

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Bonus Knowledge

Repos, or repurchase agreements, are like a little magic trick in finance! They allow dealers to manage liquidity by quickly borrowing or lending cash, using government securities as collateral. It's a fast-paced, short-term solution that keeps markets stable and efficient while allowing dealers to respond to interest rate fluctuations. So why do dealers love repos? Well, they can quickly adjust their cash positions and capitalize on market opportunities. When they anticipate changes in interest rates, they can secure financing for just a day or two, making repos a handy tool for short-term funding. It's finance wizardry at its finest!

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