The Fed's Lender-Of-Last-Resort Function

question 23

Multiple Choice

The Fed's lender-of-last-resort function

• A)has proven to be ineffective.
• B)cannot prevent runs by large depositors.
• C)is no longer necessary due to FDIC insurance.
• D)creates a moral hazard problem.

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Definitions:

Coupon

Represents the interest payment that a bond issuer owes to the bondholders, typically expressed as an annual percentage of the bond's face value.

Bond B

Refers to a specific class or series of bond, which may be characterized by its rank, terms, issuing entity, or other defining features.

Coupon Bond

A debt security that pays the holder a fixed interest payment (coupon) at regular intervals until the maturity date, when the principal amount is repaid.

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including both interest payments and the gain or loss realized on the principal amount.