Recall that Carson Company has obtained substantialloans from finance companies and commercial banks.The interest rate on the loans is tied to market interestrates and is adjusted every six months. Expecting astrong U.S. economy, Carson plans to grow by expand-ing its business and by making acquisitions. The com-pany expects that it will need substantial long-termfinancing, and it plans to borrow additional fundseither through loans or by issuing bonds. The CarsonCompany is also considering issuing stock to raisefunds in the next year.Given its large exposure to interest rates charged onits debt, Carson closely monitors Fed actions. It sub-scribes to a special service that attempts to monitor the Fed ’ s actions in the Treasury security markets. Itrecently received an alert from the service that sug-gested the Fed has been selling large holdings of itsTreasury securities in the secondary Treasury securitiesmarket.

a. How should Carson interpret the actions by theFed? That is, will these actions place upward ordownward pressure on the price of Treasury securities?Explain.

b. Will these actions place upward or downward pressure on Treasury yields? Explain.

c. Will these actions place upward or downward pressure on interest rates? Explain.