When banks want to borrow ESF from the RBA overnight ... - the bank is paying...
When banks want to borrow ESF from the RBA overnight ...
- the bank is paying the cash rate target minus 25 basis points.
-the bank can get this loan unsecured.
-the bank has to provide collateral, i.e. security in form of a bond.
-the bank is paying the cash rate target.
Homework Answers
Answer- The bank has to provide collateral, i.e. security in form of a bond.
Explanation: Since RBA(Reserve Bank of Australia) through its open market operations(OMO) affects the supply of ESF in order to influences the cash rate. So in order to borrow ESF from RBA overnight, banks sells government bonds to RBA.
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When banks want to borrow ESF from the RBA overnight ...
- the bank is paying...
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Multiple choice question
QUESTION 6 You are representing the RBA and noted that the cash rate is higher than the RBA target cash rate. The RBA should buy bonds and thereby push more ESF into the banking system to reduce the pressure in the interb There is nothing that the RBA can do about this situation because the central bank is independent of the governmen The RBA should advise the banks to lend to each other at the agreed target...
Multiple choice question QUESTION 8 An Repo implies that the "lender" receives a security for the...
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QUESTION 8 An Repo implies that the "lender" receives a security for the time of the "loan". Since the RBA accepts only high quality securities, this makes the Repo risk-free. Despite the low risk, the RBA usually charges more than the interbank rate in order to deter banks from requesting an overnight ESF loan from the RBA. Because of the low risk, the RBA usually charges less than the interbank rate. The interbank rate is for unsecured...
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