Question

13. An important way in which the Federal Reserve has conducted monetary policy is by selling bonds in how supply/demand for reserves will be impacted by the open market sale. 14. Calculate the future value in five years of $1,000 invested today if you earn: 6% compounded annually b, 6% APR compounded semiannually C. 6% APR compounded quarterly (6 points)
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Answer #1

Answer - 14

a.

FV-PV (1i)

FV = $1000 * (1+.06)^5

= $1338.23

b. FV = $1000 * (1+.03)^10

= $1343.92

c. FV = $1000 * (1+..015)^20

= $1346.86

Answer - 13

Interest rates are indirectly affected by selling of bonds in open market. Open market selling and buying allows federal reserve to control the money supply in economy. When Federal reserves sells the bonds in open market, it will reduces the amount of money in circulation. changes in the money supply will affect the rates at which bank lend to one another.


answered by: ANURANJAN SARSAM
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