If the Fed Wants to Increase the Interest Rate,it Will

question 111

Multiple Choice

If the Fed wants to increase the interest rate,it will

• A) buy bonds and increase the money supply.
• B) buy bonds and decrease the money supply.
• C) sell bonds and increase the money supply.
• D) sell bonds and decrease the money supply.
• E) sell bonds and increase money demand.

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Definitions:

Coupon Rate

The annual interest rate paid on a bond's face value to its holders, expressed as a percentage of the face value.

Duration

Measures the sensitivity of a bond's price to changes in interest rates, calculated as a weighted average of the times until the bond's cash flows are received.

Yield To Maturity

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

Coupon Rate

The interest rate that a bond issuer will pay to a bondholder, typically expressed as an annual percentage of the bond's face value.