Which of the Following Rates Does the Fed Actually Set

question 88

Multiple Choice

Which of the following rates does the Fed actually set?

• A) the Federal Funds rate
• B) market interest rates
• C) the discount rate
• D) The Fed sets each of these rates.

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Definitions:

Hedge

An investment strategy used to reduce risk by taking positions that offset potential losses in other investments.

Strike Price

The strike price is the price at which the holder of an option contract has the right to buy (for a call option) or sell (for a put option) the underlying asset or security upon exercise of the option.

Futures Option

An option contract that gives the holder the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a certain date.

Forward Contract

A contractual arrangement to purchase or sell a given commodity or asset at a set price on a designated date in the future.