Discuss the impact of each of the expansionary activities conducted by the Federal Reserve on the money supply, credit availability, interest rates, and security prices. Do the same for contractionary activities. In your response indicate which monetary policy tool has been more effective.

Short term (one year) interest rates over the next 6 years will be 0.5%, 0.6%, 0.7%, 0.76%, 0.80% and 0.84%.

• Using the expectations theory, what will be the interest rates on a three, four, and six-year bonds?
• Assuming the investors prefer holding short-term Treasury bonds, a liquidity premium of 10 basis points is required for each year of a bond's maturity. What will be the interest rates on two, four, and six-year bonds?

A bank currently has $150 million in deposits, and $15 million in reserves. The required reserve ratio is 10% and federal funds rate of 0.25%. Suppose there is a deposit outflow (i.e. someone withdraws funds from their account) for $5 million. Please provide answers to the following questions with explanations:

• Would this bank still comply with the Feds requirement of keeping 10% of its deposits in the form of reserves? Please explain
• What would be the cost for this bank to comply with this regulation if the bank decides to borrow from another bank to eliminate its reserve shortage?
• What would be the cost for this bank to comply with its required reserves if the bank decides to borrow from the Fed at a discount rate of 0.75%?
• Please explain why required reserves serve as insurance against deposit outflows.

Consider a commercial bank policy to maintain 12% of deposits as reserves. The bank currently has $10 million in deposits and holds $400,000 precautionary excess reserves. What is the required reserve on a new deposit of $50,000?