The Fed Is Concerned About Inflation

question 140

Multiple Choice

The Fed is concerned about inflation.Its policy will ________ U.S.short-term interest rates and,in the foreign exchange market,lead to the value of the U.S.dollar ________.

• A)lower;rising
• B)raise;rising
• C)raise;not changing
• D)lower;falling
• E)lower;not changing

---

Definitions:

Pure Yield Pickup Swap

A strategy where an investor swaps out of one bond into another with the aim of achieving a higher yield.

Price Risk

The possibility that the value of a financial instrument or asset will fluctuate due to changes in market prices, affecting investors' returns.

Reinvestment Rate Risk

The risk that income from an investment will be reinvested at a lower rate than the original investment.

Time Horizon

The length of time an investor expects to hold an investment before taking money out.