If the Fed Buys a T-Bill from a Commercial Bank

question 45

Multiple Choice

If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?

• A) It will give the bank new reserves.
• B) It will write the bank a check.
• C) It will transfer cash to the bank's vault.
• D) It will take reserves from another bank.

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Definitions:

Strike Price

The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset, until the option expires.

Call Contract

A financial agreement giving the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specific price within a specific time period.

Ticker Symbol

A unique series of letters assigned to a security for trading purposes.

CBOE Option Contract

A contract that gives the holder the right to buy or sell a specific quantity of a security at a specified price on or before a certain date, traded on the Chicago Board Options Exchange.