Repurchase agreements

Question 31Repurchase agreements are used by investment banks as source of liquidity. A bank that wants to borrow funds sells assets to a lender promising to buy the assts back. The sale price is always higher than the repurchase priceTrue or False?Question 32Financial institutions that rely on REPOs are forced to go back to the market regularly to roll over maturing paper. This is a risk to the firm since fear of lenders can create a severe liquidity crisis for the borrowing firm.True or False?Question 33Once Bear Stearns collapsed the spread between the yield on 1 month commercial paper and one treasury bills continued to steadily widen until May of 2009 when it stabilized.True or False?Question 34According to the Financial Accounts of the United States the treasury securities held by security broker-dealers increased by over $500 billion in the fourth quarter of 2008.True or False?Question 35According to the Financial Accounts of the United States; open market paper owned by money market mutual funds declined by $594,156,800,000 in the third quarter of 2008.True or False?Question 36The largest quarterly drop in real GDP since 1979 was in the first quarter of 2009 at -6.4%.True or False?Question 31Repurchase agreements are used by investment banks as source of liquidity. A bank that wants toborrow funds sells assets to a lender promising to buy the assts back. The sale price is…

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