In each question 150-200 words, please answer the following for 5 points possible
1. Explain how and why the secondary capital markets plan and important role in our economy. How do secondary markets assist the primary market?
2. Assume the fed pays $1000 for a government bond on the open market. With a 5% reserve requirement, what is the theoretical ultimate addition to the money supply and why.
3. Define and discuss interest rate risk. What are the two risk components or interest rate risk and how do these interact with each other?