Essentially, this means that the FED raises interest rates when inflation gets out of control and it lowers interest rates when the economy is too slow.
But when the economy slows, the FED pumps the gas by lowering interest rates and increases the money fuel. For one thing, when the FED steps on the gas by lowering interest rates (or takes its foot of the gas by raising interest rates), it can take 6 months or more before the economy starts to feel the effects of the fuel supplied by the lowering of the interest rates. In reality, even without the federal deposit insurance, money invested in these options is very safe as banks very rarely forfeit on these investments, but for peace of mind it obviously makes sense to insure all of your investments. The interest rate is affected by a great many factors (discussed below), but in general, higher return is paid for additional risk.
Therefore, corporate bonds issued from weak companies are usually the highest paying because there is the greatest risk of forfeiture (i.e.
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