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Unformatted text preview: erest rates paid by banks and money market accounts will be low (which often results in money being moved to higher yielding securities such as bonds or stocks) 25 How Long Term Interest Rates Impact Consumers Positive impacts of current policy Quantitative easing (QE) involves purchasing long term bonds in open market Higher demand drives up price, reduces yield Interest rates on fixed rate mortgages is near historical low(should stimulate housing) Negative impacts of current policy Fed effectively printing more money, long term inflationary risk when position unwinds Likely increase in future rates 26 Changing Interest Rates and Decisions Related to Financial Services People Who Are: Investors Borrowers Actions if Interest Rates Are Increasing Keep short term horizon e.g. short term CD Lock in long term rates e.g. mortgage Actions if Interest Rates Are Decreasing Lock in long term rates e.g. long CD or bonds Borrow short term, wait for fall to lock in 27 Types of Financial Institutions Deposit type insti...
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This document was uploaded on 02/12/2014.

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