The Interest Rate for Primary Credit Is Usually Set ________

question 4

Multiple Choice

The interest rate for primary credit is usually set ________ basis points ________ the federal funds rate. In March 2008,this gap was changed to ________ basis points.

• A)50;below;100
• B)100;above;25
• C)100;below;50
• D)50;above;25

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Definitions:

Pure Yield Curve

The relationship between yield to maturity and time to maturity for zero-coupon bonds.

Zero-coupon Treasuries

U.S. Treasury securities that are sold at a discount from their face value and do not pay interest before maturity; investors receive the face value at maturity.

Stripped Treasuries

U.S. Treasury securities that have separated their interest and principal payments into two distinct securities, allowing investors to receive either a lump sum at maturity or periodic interest payments.

Treasury Securities

Debt instruments issued by the government to finance its expenditures, considered low-risk investments.