3. Draw and label the bond market graph covered in chapter 5. Then, using the graph, illustrate how the equilibrium price, yield to maturity, and quantity changes as a result of: a. An increase in expected inflation. Explain the movement from one equilibrium to another. b. A decrease in riskiness of bonds. Explain the movement from one equilibrium to another. c. An increase in the profitability of business investment. Explain the movement from one equilibrium to another. Use a different graph for each one and clearly label the axis and the shifting of curves. Explain clearly (in words and on the graph) whether the price and yield to maturity increased or decreased.
3. Draw and label the bond market graph covered in chapter 5. Then, using the graph,
illustrate how the
a. An increase in expected inflation. Explain the movement from one equilibrium to another.
b. A decrease in riskiness of bonds. Explain the movement from one equilibrium to another.
c. An increase in the profitability of business investment. Explain the movement from one
equilibrium to another.
Use a different graph for each one and clearly label the axis and the shifting of
clearly (in words and on the graph) whether the price and yield to maturity increased or
decreased.
The market price at which the quantity of goods supplied equals the quantity of goods demanded is known as the equilibrium price. This is the point at which the market's demand and supply curves intersect. Yield to maturity (YTM) is the total rate of return earned by a bond after it has made all interest payments and repaid the original principal. YTM is a bond's internal rate of return (IRR) if held to maturity.When a product's supply equals its demand, the quantity is said to be in equilibrium.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
