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Question:
Consider the following statements:
Statement 1: Any coupon income received from a bond during the term of the repo belongs to the buyer.
Statement 2: The repo margin serves to protect the seller against a decline in the value of the collateral over the term of the repo.
Which of the following is most likely?
A
Both statements are incorrect.
explanation
Any coupon income received from a bond during the term of the repo belongs to the seller (borrower).
The repo margin serves to protect the buyer (lender) against a decline in the value of the collateral over the term of the repo.
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