CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

When the Federal Reserve raises the federal funds rate, the long-term real interest rate ______ and investment ______.
A. rises; increases
B. falls; decreases
C. rises; decreases
Explanation: If other factors remain the same, the lower the real interest rate, the greater the amount of investment.

User Contributed Comments 2

User Comment
Lambo83 i thought the Fed raising short-term rates can actually lower long-term rates due to inflation and business expectations in the longer-term future. Higher rates today should mean lower inflation in the future. Essentially I'm talking about manipulating the yield curve. Anyone has anyone useful thoughts on this view?
edwardike Maturity risk. If short term investors get compensate for x, long term must be compensated for x+
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