In Order to Move the Federal Funds Rate to the Level

question 168

Multiple Choice

In order to move the federal funds rate to the level it desires, the Fed must

• A) first change the discount rate to the desired federal funds rate.
• B) specify the interest rate on previously issued government bonds.
• C) adjust the money supply to achieve the target federal funds rate.
• D) limit the amount of bank lending activity.

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Definitions:

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is the minimum at which shares can be issued.

Coupon Paid Semiannually

A bond payment made twice a year, representing the interest owed to bondholders.

Annual Coupon

The yearly interest payment made to bondholders, usually fixed and expressed as a percentage of the bond's face value.

Market Risk

The possibility of investors experiencing losses due to factors that affect the overall performance of the financial markets.