1. Assume that the reserve requirement ratio is 9.5 percent and that the Fed uses open market operations to buy $250 million worth of Treasury securities. Assuming that banks use all funds except required reserves to make loans and that the public does not store any cash, the money supply should ____ by about ____.
increase; $2.63 billion
increase; $1.67 billion
decrease; $2.63 billion
decrease; $1.67 billion
2. An investor purchased an NCD a year ago in the secondary market for $980,000. She redeems it today and receives $1,000,000. She also receives interest of $20,000. The investor's annualized yield on this investment is
2.0 percent.
5.10 percent.
4.08 percent.
2.04 percent.