$1,000$980$960$940$920$900$880DS$860$840$820$800$780$760$740$720$700$0$50$100$150$200$250$300$350$400$450$millionThe graph above shows the market for a one-year discount bond with a face value of $1,000. Thegovernment's budget deficit increases by $150 million and to finance that deficit it borrows in thismarket. This will result in the interest rate to change to:Choose the number closest to the answer.O 19.05 percentO 16.28 percentO 13.64 percentO 8.70 percentBond Price

The price of bond and interest rate are inversely related to each other. It means as the interest…

Answered: $1,000 $980 $960 $940 $920 $900 $880…

$1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 $780 $760 $740 $720 $700 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Bond Price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

$1,000
$980
$960
$940
$920
$900
$880
D
S
$860
$840
$820
$800
$780
$760
$740
$720
$700
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$million
The graph above shows the market for a one-year discount bond with a face value of $1,000. The
government's budget deficit increases by $150 million and to finance that deficit it borrows in this
market. This will result in the interest rate to change to:
Choose the number closest to the answer.
O 19.05 percent
O 16.28 percent
O 13.64 percent
O 8.70 percent
Bond Price

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