Loans

SBS Bank needs short term financing. It decides to use some of its bonds, which are very secure, as collateral.

SBS Bank does this by a repurchase agreement with the Central Bank.

That involves:

A) Selling the bonds and promising to buy them back one week later at a very slightly higher price.

B) A collateral loan, which SBS bank can pay back within 2, 5 or 10 days, depending on the cash reserves ratio

C) An interbank loan

D) Buying securities from the Central bank who agrees to repurchase then at a higher price

E) None of the answers are correct