Why Was the Fed Created in 1913 and Why Is

question 27

Essay

Why was the Fed created in 1913 and why is it so important in economic policy?

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, including all interest payments and the repayment of principal.

Modified Duration

Macaulay’s duration divided by 1 + yield to maturity. Measures interest rate sensitivity of bonds.

Macaulay Duration

A measure of the weighted average time until all cash flows from a bond are received, used to gauge a bond's interest rate sensitivity.