Which of the Following BEST Describes Two of the Three

question 14

Multiple Choice

Which of the following BEST describes two of the three primary functions of the Federal Reserve System?

• A) Developing new financial markets and aiding banks in conducting their business
• B) Aiding banks in conducting business and managing the U.S. money supply and interest rates
• C) Managing the U.S. money supply and interest rates and monitoring interbank relationships
• D) Monitoring interbank relationships and acting as a bank for the federal government
• E) Acting as a bank for the federal government and developing new financial markets

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Definitions:

Opportunity Cost of Capital

The potential return lost by investing capital in one project instead of another with a higher return.

Expected NPV

The anticipated net present value, which estimates the present value of future cash flows minus initial investments, accounting for risk and uncertainty.

Project

A scheduled collection of connected activities designed to be completed within a specific timeframe and under predetermined budget and restrictions.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.