C.Repos

Another very common form of financial contract is a repurchase agreement (or repo). A repo is a combination of two transactions, as shown below. The dealer hopes to find a long-term buyer for the securities before repurchasing them.

1. Are the following statements true or false? Find reasons for your answers in A and B opposite.

1.Organizations use the money markets as an alternative to borrowing from banks.

2. Money markets are a source of long-term finance.

3. All money market instruments pay interest.

4. Certificates of deposit are issued by major manufacturing companies.

5. Commercial paper is guaranteed by the government.

6. Some money market instruments can have more than one owner before they mature.