If the Fed Decides to Buy T-Bills, It Increases the Demand

question 82

Multiple Choice

If the Fed decides to buy T-bills, it increases the demand for T-bills.How will this affect the price of T-bills and the interest rate?

• A)T-bill prices fall and interest rates fall.
• B)T-bill prices rise and interest rates rise.
• C)T-bill prices rise and interest rates fall.
• D)T-bill prices fall and interest rates rise.

Recognize the factors influencing the expected return of a portfolio, including weights based on probability, investment amount, and systematic risk.

Realize the potential to manage and manipulate portfolio risk through investment in diverse securities including international exposure.

Acknowledge the limitations of diversification, particularly in eliminating all forms of risk.

Understand the stages of ethical development and their characteristics.

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Definitions:

D/A

Debt-to-Assets ratio, a financial metric indicating the proportion of a company's assets that are financed by debt.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all incomes and expenses except interest and income tax expenses.

Common Share Price

The market price of a single share of a company's common stock, reflecting the company's valuation, investor sentiment, and market conditions.

WACC

Weighted Average Cost of Capital, a calculation of a firm's capital cost where each category of capital is proportionately weighted.