When the Fed Sells Government Securities to a Bank, How

question 468

Multiple Choice

When the Fed sells government securities to a bank, how are the Fed's assets affected?

• A) The amount of the Fed's government securities decreases.
• B) The amount of the Fed's government securities increases.
• C) The amount of reserves held at the Fed increases.
• D) The amount of reserves held at the Fed decreases.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which does not necessarily reflect its market value.

Preferred Stock

A category of corporate ownership that ranks above common stock in terms of asset claims and earnings, usually providing fixed dividend payouts.

Guaranteed Dividend

A dividend that is promised to be paid to shareholders of a company out of future earnings or profit.