Answer:
The remaining part of the question is:
The interest payments are reinvested at the:
a.Coupon rate.
b.Current yield.
c.Yield to maturity at the time of the investment.
d.Prevailing yield to maturity at the time interest payments are received.
e.The average yield to maturity throughout the investment period
<u>Correct Answer:</u>
b.<u>Current yield. </u>
<u></u>
Explanation:
If the Federal Reserve increases the interest rate that it pays on your deposits with them increase reserves at the Fed and reduce loans.
If the Federal Reserve increases the interest rate that it pays on your deposits with them, this means that the amount I deposit with the Fed would earn a higher rate of interest.
The aim of businesses is to make profit. As a result, I would increase the amount I deposit with the Fed in order to earn a higher rate of interest on my deposit and I would reduce the amount of loans I make.
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