Page 27 - Introduction To Investment Management

acceptance. Normally, these notes are sold at a discounted value just like a treasury bill
and available in the secondary market.

E. Repurchase Agreement (Repo)

In Repurchase Agreement or Repo, the bank sells its money market instruments
approved by Bank Negara Malaysia to their potential investors, with term to buy back the

same instruments at an agreed price include interest rate on a specific future date.
A repo offers flexibility since the tenor ranges from 1 day up to 1 year. The

investors also have an option to surrender the agreement earlier (Reverse Repo) upon
maturity period.

F. Eurodollar

Eurodollar deposits refer to the denomination (currency) of certain country which

available at foreign banks or local bank branches in the foreign countries. Consequently,

this type of deposits is subject to comply with that country's central bank. Investors will
receive interest on these deposits as savings in the fixed deposit account or a Certificate
of Deposit. The Eurodollar trades mostly overnight, although deposits and loans out to 12

months are possible. Even though deposits are placed in off-shore market, much of the

activity takes place in New York trading rooms while being booked into off-shore
accounts. A 2016 study by the Federal Reserve Bank (USA) indicated the average daily

turnover in the Eurodollar market was USD140 billion. Transactions are usually for a
minimum of USD25 million and can top USD1 billion in a single deposit.

G. Federal Fund

Every bank which operates in an economy is required to make the reserve deposit

(savings) in the Central Bank or the Federal Reserve System. The total reserves that
imposed on a bank are depending on the number of deposits of the customers. The

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