Question

The securities that the Federal Reserve holds on its balance sheet include?

1) privately issued stocks, US Treasury securities, and federal agency debt.
2) municipal bonds, privately issued stocks, and US Treasury securities.
3) US Treasury securities, municipal bonds, and federal agency debt.
4) US Treasury securities, federal agency debt, and privately issued mortgage-backed securities.

Answer 1

The Federal Reserve's balance sheet includes US Treasury securities, federal agency debt, and privately issued mortgage-backed securities, but not stocks or municipal bonds. The correct option is 4)

Step-by-step explanation:

The securities that the Federal Reserve holds on its balance sheet do not include privately issued stocks or municipal bonds. Instead, the Federal Reserve's assets primarily consist of US Treasury securities, federal agency debt, and privately issued mortgage-backed securities. The purchase of US Treasury securities is a common investment for banks as they are considered low-risk; the government is virtually certain to repay them, though the interest rates are low. These securities provide a stream of future payments, much like loans, and are considered assets.