Please give a thorough explanation AND the step by step

Class: Money and Banking ECON 3320

4. a. Draw a supply and demand graph to illustrate the following:

A fall in inflationary expectations in the economy, evoking a much weaker response

from issuers of bonds than investors in bonds. Make sure to label your axes. In the diagram label the

initial equilibrium E₁ and the new equilibrium after the change in inflationary expectations E₂

b. Based on your diagram what happens to the equilibrium interest rate after the change in inflationary expectations?

5. For the following problems use the numbers provided to write out the formula you would use to find the answer, but do not carry out the actual calculation.

For example, if I said find the value one year from now of $100 invested today at i = 5%,

the correct answer would be: 100 (1 + .05)

a. How much money would you need to start out with today to have $X in

12 years ifi = 8.4% .

b. Find the present value of $500 received3 years from now ifi = .6%

c. Find the yield to maturity of a coupon bond selling for $390 that has annual coupon payments of $80, a face value of $100 and a maturity of four years.