The Treasury Department is currently holding an open auction on bonds. Each bond has a face...

 

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The Treasury Department is currently holding an open auction on bonds. Each bond has a face value of $3,500,000. Complete all three parts (a-c). a. Suppose you pay $3,300,000 for the bond at auction. Solve for the interest rate you receive on this bond. Round to four decimal places (otherwise, you will lose credit). b. What is the relationship between bond prices and the corresponding interest rate? c. In order to encourage an increased number of bonds to be sold, to help finance the national debt, the interest rate on the bond should increase. What impact will this increased interest rate, resulting from the increased number of bonds to finance government spending have on the aggregate expenditures? What is the name of the effect that arises in this situation? The Treasury Department is currently holding an open auction on bonds. Each bond has a face value of $3,500,000. Complete all three parts (a-c). a. Suppose you pay $3,300,000 for the bond at auction. Solve for the interest rate you receive on this bond. Round to four decimal places (otherwise, you will lose credit). b. What is the relationship between bond prices and the corresponding interest rate? c. In order to encourage an increased number of bonds to be sold, to help finance the national debt, the interest rate on the bond should increase. What impact will this increased interest rate, resulting from the increased number of bonds to finance government spending have on the aggregate expenditures? What is the name of the effect that arises in this situation?