Which of the Following Sequence of Events Follows an Open

question 195

Multiple Choice

Which of the following sequence of events follows an open market purchase by the Fed?

• A) r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓
• B) r↑ ⇒ I↑ ⇒ AE↓ ⇒ Y↑
• C) r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑
• D) r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↓

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Definitions:

Par Value

The face value of a bond or stock, typically the value printed on the certificate, which does not necessarily reflect its market value.

Treasury Bond

Long-term government debt securities issued by the U.S. Department of the Treasury, with maturity periods typically ranging from 20 to 30 years, considered low-risk investments.

Annual Coupon

The yearly interest payment made by a bond issuer to its bondholders, usually fixed at the time of issuance.

Yield to Maturity

The total expected return on a bond if held until its maturity date, considering all payments from interest and principal, expressed as an annual rate.