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Draw the graph by hand and then scan to convert to pdf$.$

Upload these two documents $($solutions and graph$)$ separately.

$3\mathrm{.}1.$ An ecciomist has estimated that, near the point of equilibrium, the demand curve and supply curve for one$-$year discount bonds with face value of $$1,000$ can be estimated using the following equations:

B demand: $P=-\frac{2}{5}Q+940$

B supply: $P=Q+500$

a$.$ What is the expected equilibrium price and quantity of bonds in this market?

b$.$ Given your answer to part $($a$),$ which is the expected interest rate in this market?

$3\mathrm{.}2.$ Demand and Supply curves for bonds are to be the same as in $3\mathrm{.}1.$

Following a dramatic increase in the value of the stock market, many retirees started moving money out of the stock market and into bonds. This resulted in a parallel shift in the demand for bonds, such that the price of bonds at all quantities increased $$50.$

a$.$ Assuming no change in the supply equation for bonds, what is the new equilibrium price and quantity?

b$.$ What is the new market interest rate?

$3\mathrm{.}3.$ Demand and Supply equations for bonds are estimated as in problem $3\mathrm{.}1.$

As the stock market continued to rise, the Federal Reserve felt the need to increase the interest rates. As a result, the new market interest rate increased to $19\mathrm{.}65\%,$ but the equilibrium quantity remained unchanged.

What are the new demand and supply equations? Assume parallel shifts in the curves.

Hint: you need to find the new equilibrium $P^{**}$ and $Q^{**},$ and then plug them in the equations for Demand and Supply to find the new Demand and Supply.

$3\mathrm{.}4.$ Graphically represent the situations in questions $1,2,3$ above. Make sure to label all curves, shifts of the curves, and all equilibrium points. The graph could be not to scale, but all necessary labels must be present.