Purchase Solution

Impact of the Federal Funds Rate on Saving vs. Investing

Not what you're looking for?

Ask Custom Question

Investors should save when interest prices go up. Do you think most smart investors are doing this?
Do you think our interest rates currently, at the national level, are reasonable?

Purchase this Solution
Solution Summary

This 359 word solution is an examination of the impact that the Federal Reserve increasing the federal funds rate has on savings, investing and the national economy in general. It includes a prediction for the future direction of the federal funds rate as well as links to the utilized sources.

Solution Preview

Saving Based on Interest Rate Questions
Investors should save when interest prices go up. Do you think most smart investors are doing this?
Do you think our interest rates currently at the national level are at a reasonable level?

Do you think most smart investors are doing this?
When interest rates increase, an investor has to examine all of his/her options. The investor will have to compare the average dividend yield on a stock to the interest rate on a certificate of deposit (CD) or the U.S. Treasury bond (T-bonds). The option typically selected in based on the investment that will ...

Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Monetary Policy & Financial Institutions

    Federal funds rate is the rate on overnight loans among commercial banks (Case and Fair, 2007). As noted in the earlier discussions, the government is in the process of further stimulating the economy for the next two years or so.

  • U.S. Federal Reserve

    The US Federal Reserve rate should not be decreased. The high liquidity with the banks also leads to misuse of funds.

  • Loaning versus investing available funds

    What impact, if any, does this have on the effectiveness of monetary policy actions taken by the Federal Reserve? Why do you suppose that the banks are under-going this change?

  • The Role of the Federal Reserve in the Economy

    The interest on these loans is known as the Federal Funds Rate, and this rate naturally fluctuates in response to market conditions.

  • Cost Cutting Measures

    The rate of return is much higher on mutual funds than other investments (CD's, savings accounts) but I realize it may take several years before seeing a return on those investments.

  • Predicting the future course of Fed policy

    Now, suppose, we believed that slower travel activity was the result of higher gasoline or other transportation costs, then the Federal reduction of interest rate would not have any impact on the consumers' demand for travel tours.

  • International Finance and Short Term Funds

    In the U.S., short-term interest rates have climbed in 2004, as the Federal Reserve has so far raised the fed funds rate to 2%, from 1% before the first rate hike in June 2004.

  • Securitization of loans

    Major sources of funds? Following are the principle use of commercial bank funds: (i) It facilitates saving and capital formation. (ii) Offers loan to the consumers and firms for consumption and investing purposes respectively.

  • Contractionary policies

    For example, consider the current crisis. The Fed reduced the federal funds rate from 4.25% to 0-0.25% in a matter of few months. The current rate is the lowest that the federal funds rate has fallen to in its history.

View More Related Solutions