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You have held a 30-year US Treasury Bond with a par value of $1,000 for 5 years. When you purchased it, the coupon payment was $45/year. The US Federal Reserve Bank (FED) wishes to buy the bond as part of an open market purchase operation. You agree to sell the bond for $1,025. What has happened to the yield on the bond? What is the FED attempting to do in the broader economy; not just buying bonds from you but also buying bonds from the rest of the public holding bonds.

You have held a 30-year US Treasury Bond with a par value of $1,000 for 5 years. When you purchased it, the coupon payment was $45/year. The US Federal Reserve Bank (FED) wishes to buy the bond as part of an open market purchase operation. You agree to sell the bond for $1,025. What has happened to the yield on the bond? What is the FED attempting to do in the broader economy; not just buying bonds from you but also buying bonds from the rest of the public holding bonds.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
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You have held a 30-year US Treasury Bond with a par value of $1,000 for 5 years. When you purchased it, the coupon payment was $45/year. The US Federal Reserve Bank (FED) wishes to buy the bond as part of an open market purchase operation. You agree to sell the bond for $1,025. What has happened to the yield on the bond? What is the FED attempting to do in the broader economy; not just buying bonds from you but also buying bonds from the rest of the public holding bonds.
Transcribed Image Text:You have held a 30-year US Treasury Bond with a par value of $1,000 for 5 years. When you purchased it, the coupon payment was $45/year. The US Federal Reserve Bank (FED) wishes to buy the bond as part of an open market purchase operation. You agree to sell the bond for $1,025. What has happened to the yield on the bond? What is the FED attempting to do in the broader economy; not just buying bonds from you but also buying bonds from the rest of the public holding bonds.
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