Dealers in Treasury securities finance their inventories through a. Repurchase agreements (RPs) b. Loans from commercial...
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Dealers in Treasury securities finance their inventories through
a. Repurchase agreements (RPs)
b. Loans from commercial banks
c. Loans from the Fed
d. Dealers do not hold inventories
Homework Answers
Option A is correct.
Repurchase agreements (RPs)
Explanation:
Dealers generally use repurchase agreements and roll it over day by day to finance inventory and thud they avoid taking loans from Fed or from Banks. Repo generally trade 25 basis points over the Fed rate.
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