Agreement which incurs transaction between two parties and promise held that second party will repurchase security at specific price is classified as
A
repurchasing commercial notes
B
repurchase bills
C
repurchase agreement
D
reverse repurchase agreement
Correct Answer: repurchase agreement
Agreement which incurs transaction between two parties and promise held that second party will repurchase security at specific price is classified as repurchase agreement. A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.