If the Fed Decides to Sell T-Bills, It Increases the Supply

question 108

Multiple Choice

If the Fed decides to sell T-bills, it increases the supply of 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.

Identify and calculate incremental cash flows, including changes in working capital requirements.

Distinguish between replacement and new venture projects in terms of cash flow analysis.

Define and calculate opportunity costs in the context of capital budgeting.

Recognize the role of terminal values and terminal cash flows in project evaluation.

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Definitions:

Sarbanes-Oxley Act

A U.S. federal law that aimed to protect investors by improving the accuracy and reliability of corporate disclosures.

Independent Directors

Members of a company's board of directors who do not have a material or pecuniary relationship with the company or related persons, ensuring unbiased governance and decision-making.

CFO

Chief Financial Officer, a senior executive responsible for managing the financial actions of a company.

Auditing Firms

Companies specializing in examining and evaluating the accuracy of financial records and statements of a corporation or entity.