Beginning in the Latter Part of 1999, the Federal Reserve

question 169

Essay

Beginning in the latter part of 1999, the Federal Reserve raised interest rates. What do you predict happened to the prices of bonds already in the market? How can you explain this behavior?

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Definitions:

Forgoing

The act of giving up or going without something, often in the context of making financial or investment decisions.

Discount

A reduction from the usual cost of something, or in finance, the process of determining the present value of future cash flows by applying a discount rate.

Minimum Compensating Balance

The lowest balance that a business must maintain in its bank account as a requirement for banking services or loans.

Line-Of-Credit

A financial arrangement in which a bank or other lender provides a maximum loan amount that the borrower can draw from as needed, but does not exceed over a specified period.