Suppose that the current rate is 4% and markets expect the Fed to increase the rate to 4.5% at the next meeting. Then some economic news is released, leading markets to expect that at its next meeting, the Fed will set its rate at 4% with probability 50% and at 4.5% with probability 50%. Then the Fed ends up not changing its rate relative to the last meeting. What happens to the price of Treasury bonds? options: Prices go down then up. Prices go down then down. Prices don't change. Prices go up then up. Prices go up then down.
Suppose that the current rate is 4% and markets expect the Fed to increase the rate to 4.5% at the next meeting. Then some economic news is released, leading markets to expect that at its next meeting, the Fed will set its rate at 4% with probability 50% and at 4.5% with probability 50%. Then the Fed ends up not changing its rate relative to the last meeting. What happens to the price of Treasury bonds? options: Prices go down then up. Prices go down then down. Prices don't change. Prices go up then up. Prices go up then down.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Suppose that the current rate is 4% and markets expect the Fed to increase the rate to 4.5% at the next meeting.
Then some economic news is released, leading markets to expect that at its next meeting, the Fed will set its rate at 4% with probability 50% and at 4.5% with probability 50%.
Then the Fed ends up not changing its rate relative to the last meeting.
What happens to the price of Treasury bonds?
options:
|
|
Prices go down then up. |
|
|
Prices go down then down. |
|
|
Prices don't change. |
|
|
Prices go up then up. |
|
|
Prices go up then down. |
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