Typically, Increasing the Difference Between the Discount and Federal Funds

question 272

Multiple Choice

Typically, increasing the difference between the discount and federal funds rates causes

• A) an increase in market interest rates.
• B) no change in interest rates.
• C) a boom in the economy.
• D) high corporate profits.

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Definitions:

Callable Bond

A type of bond that can be redeemed by the issuer before its maturity date at a specified price.

Redemption

The process by which securities or financial instruments are converted into cash or its equivalent value.

Collar

A protective options strategy that involves buying a put option and selling a call option on the same asset to limit the range of possible returns.

Putable Bond

A type of bond that allows the holder to sell the bond back to the issuer at a predetermined price before maturity.