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Part $1$

Consider a Hydro Quebec bond with a face value of$$ $$1000,$ and a present value of

$$$$11061106.$

If this bond is offered for sale at

$$$$10661066,$

then

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Part $1$

A$.$

individuals will purchase the bond at the offer price which will drive

downdown

the price further.

B$.$

Hydro Quebec will be forced to change the face value of the bond.

C$.$

the equilibrium market price of this bond has been achieved.

D$.$

excess

demanddemand

for this bond will drive the price

upup

until it reaches its equilibrium market price of

$$$$11061106.$

E$.$

excess

supplysupply

of this bond will drive the price

downdown

until it reaches its

face valueface$$value$.$