Use the model of supply and demand for bonds to illustrate and explain the impact of each of the following on the equilibrium quantity of bonds outstanding and on equilibrium bond prices and yields: (LO3)
a. A new Web site is launched facilitating the trading of corporate bonds with much more ease than before.
b. Inflationary expectations in the economy fall evoking a much stronger response from issuers of bonds than investors in bonds.
c. The government removes tax incentives for investment and spends additional funds on a new education program. Overall, the changes have no effect on the government’s financing requirements.
d. All leading indicators point to stronger economic growth in the near future. The response of bond issuers dominates that of bond purchasers.

  • CreatedOctober 02, 2014
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