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PRMIA Exam 8006 Topic 5 Question 32 Discussion

Actual exam question for PRMIA's Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition exam
Question #: 32
Topic #: 5
[All Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition Questions]

Repos are used for:

1. Short term borrowings

II. Managing credit risk exposures

III. Money market operations by central banks

IV. Facilitating short positions

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Suggested Answer: A

Repos are collateralized borrowing arrangements. They are used for providing short term funding. They are not used for managing credit risk exposures. They are also used by central banks as part of their money market operations. They are also useful for facilitating short positions, for example, in corporate bonds where the party desirous of shorting the bond may 'borrow' the bond on repo in order to be able to sell it short.


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