Scenario: the Following Table Shows the Initial Balance Sheets of Bank

question 43

Multiple Choice

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A.

-Refer to the scenario above.After this transaction,the Fed's reserves ________ and Treasury bonds ________.

• A) increase by $10 million; increase by $10 million
• B) increase by $10 million; decrease by $10 million
• C) decrease by $10 million; decrease by $10 million
• D) decrease by $10 million; increase by $10 million

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Definitions:

Unsecured Bond

A type of bond that is not backed by collateral, relying solely on the issuer's creditworthiness.

Secured Bond

A type of bond that is backed by collateral, providing greater assurance to the lender that principal and interest payments will be made.

Equity Bond

An investment instrument that combines features of both equity and debt, often structured to convert to equity under certain conditions.

Income Bond

A bond that pays interest to its holders only if the issuing company has earned enough profits to cover the interest payments.