Consider a Hydro Quebec bond with a face value of $1000, and a present value of...
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Consider a Hydro Quebec bond with a face value of $1000, and a present value of $1071. If this bond is offered for sale at $1135, then Hydro Quebec will be forced to change the face value of the bond. the equilibrium market price of this bond has been achieved. individuals will purchase the bond at the offer price which will drive up the price further. excess demand of this bond will drive the price up until it reaches its equilibrium market price. excess supply for this bond will drive the price down until it reaches its equilibrium market price of $1071. Consider a Hydro Quebec bond with a face value of $1000, and a present value of $1071. If this bond is offered for sale at $1135, then Hydro Quebec will be forced to change the face value of the bond. the equilibrium market price of this bond has been achieved. individuals will purchase the bond at the offer price which will drive up the price further. excess demand of this bond will drive the price up until it reaches its equilibrium market price. excess supply for this bond will drive the price down until it reaches its equilibrium market price of $1071.
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Answer rating: 100% (QA)
Correct option is E Excess supply of the bond will drive the price down until ... View the full answer
Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
Posted Date:
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