Answer: B. I, II, III and IV
Explanation:
From the question, we are informed that The Federal Reserve Board foresees the probability of an overheated economy and the resumption of double-digit inflation and that the FRB takes actions to slow down the economy, including increasing the discount rate.
The effect of this is that there will be a rise in prime rate, a rise in the bond yields and an accompanying decrease in bond prices, a slowdown in corporate growth and also reduction in corporate earnings. Therefore, option B is the right answer.
