Equation (14.17) is below

Monetary policy and the stock market Assume all policy rates, current and expected into the future had been 3%. Suppose the Fed decides to loosen monetary policy and decrease the short-term policy rate (r1t) from 3% to 2%. Use equation (14.17) to assess the three scenarios given below. Do this by indicating for each scenario the direction, if any, of the effect on stock prices and its magnitude relative to the other two scenarios. Equation Qt=(1+r1t+x)Dt+1e+(1+r1t+x)(1+r1t+1e+x)Dt+2e+ Stock Prices Will Be: Monetary policy and the stock market Assume all policy rates, current and expected into the future had been 3%. Suppose the Fed decides to loosen monetary policy and decrease the short-term policy rate (r1t) from 3% to 2%. Use equation (14.17) to assess the three scenarios given below. Do this by indicating for each scenario the direction, if any, of the effect on stock prices and its magnitude relative to the other two scenarios. Equation Qt=(1+r1t+x)Dt+1e+(1+r1t+x)(1+r1t+1e+x)Dt+2e+ Stock Prices Will Be