If the Fed Sells Securities Worth $10 Million to a Commercial

question 24

Multiple Choice

If the Fed sells securities worth $10 million to a commercial bank, the Fed's balance sheet will show

• A)an increase in securities held of $10 million and an increase in bank reserves of $10 million.
• B)an increase in securities held of $10 million and a decrease in bank reserves of $10 million.
• C)a decrease in securities held of $10 million and an increase in bank reserves of $10 million.
• D)a decrease in securities held of $10 million and a decrease in bank reserves of $10 million.

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Definitions:

Pure Play Method

A valuation method that compares a company to others within the same industry or sector with a single focus or product line.

Firm's Cost of Capital

The minimum return that a company must earn on its investments to maintain its market value and satisfy its creditors and investors.

Specific Division

A distinct business unit within a larger organization, often focused on a particular product line or market segment.

Risk Averse Manager

A manager who prioritizes minimizing risks in decision-making and strategy, favoring safer investments with potentially lower returns.