Reading 29: Fixed Income Portfol....ement - Part II－LOS b factors, affect, finance

tycoon

CFA Institute Area 8-11, 13: Asset Valuation
Session 9: Portfolio Management of Global Bonds and Fixed Income Derivatives
Reading 29: Fixed Income Portfolio Management - Part II
LOS b: Discuss the use of repurchase agreements (repos) to finance bond purchases and the factors that affect the repo rate.

tycoon

Which of the following is least likely to expose the lender in a repurchase agreement (repo) to credit risk related to the delivery of the collateral?

A) The borrower has their bank hold the collateral instead of the lender in the repo agreement.

B) The borrower sells the collateral prior to delivery.

C) The borrower has already used the asset as collateral for another loan that has not matured.

D) The borrower files for bankruptcy before the collateral is delivered.

---

Answer and Explanation

While the lender would prefer to have possession of the collateral, having the borrowers bank hold the collateral is the least likely of the above to expose the lender to credit risk.

While the lender would prefer to have possession of the collateral, having the borrowers bank hold the collateral is the least likely of the above to expose the lender to credit risk.

While the lender would prefer to have possession of the collateral, having the borrowers bank hold the collateral is the least likely of the above to expose the lender to credit risk.

[此贴子已经被作者于2008-9-18 17:40:52编辑过]

tycoon

An agreement whereby the seller of a security agrees to repurchase it from the buyer on an agreed upon date at an agreed upon price is called a:

A) repurchase agreement.

B) commercial paper.

C) negotiable certificate of deposit.

D) banker's acceptance.

---

Answer and Explanation

An agreement whereby the seller of a security agrees to repurchase it from the buyer on an agreed upon date at an agreed upon price is called a repurchase agreement.

An agreement whereby the seller of a security agrees to repurchase it from the buyer on an agreed upon date at an agreed upon price is called a repurchase agreement.

An agreement whereby the seller of a security agrees to repurchase it from the buyer on an agreed upon date at an agreed upon price is called a repurchase agreement.

[此贴子已经被作者于2008-9-18 17:41:46编辑过]

tycoon

Which of the following CORRECTLY describes a repurchase agreement?

A) The purchase of a security with a commitment to purchase more of the same security at a specified future date.

B) The sale of a security with a commitment to repurchase the same security at a future date left unspecified, at a designated price.

C) The sale of a security with a commitment to repurchase the same security where the price and the date of the repurchase are left unspecified.

D) The sale of a security with a commitment to repurchase the same security at a specified future date and a designated price.

---

Answer and Explanation

A repurchase agreement is an agreement whereby the seller of a security agrees to repurchase it from the buyer on an agreed upon date at an agreed upon price. Repos typically used by securities dealers as a means for obtaining funds to purchase securities.