Please answer both and provide reasoning to why you chose an answer: 1) Because
ID: 1167305 • Letter: P
Question
Please answer both and provide reasoning to why you chose an answer:
1) Because interest rates may vary significantly across countries at a given point in time, investors do not monitor the term structures of interest rates in foreign countries unless they are interested in investing in a particular foreign country.
a. True
b. False
2) If the Fed initiates a program to purchase long-term Treasury securities, it is most likely attempting to
A) reduce the rate on short-term Treasury securities.
B) reduce the rate on commercial paper.
C) reduce inflation.
D) reduce long-term interest rates.
Explanation / Answer
1). False
Because investors look to earn more interest by investing in nations which have higher interest rates so that they can maximise their returns.
2). Option D
By purchasing the Treasury securities the Fed increases money supply which reduces the interest rates.