Supply Damand questions

Supply Damand questions - corporate bonds have higher risks...

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1 The volitility of the stock market increases Qs = f(p, g bonds less risky increases demand p +, g +, b Qd = f(p, w 2 An SEC ruling allows brokerage firms to reduce their commissions p+ w + r - L on bond transactions but not on stock tranactions more liquid increases demand 3 There is an increase in home prices of 8% in one year wealth increases demand increases 4 People expect higher interest rates in the future higher interest rates decrease the demand for bonds today 5 The government allows the Bush tax cuts to expire this will increase the amount of tax revenue the government collects meaning that they w government bonds and that will decrease the supply of demands 6 A recession begins B will decrease because they will issue less in bonds to purchase new PPE, decreasing 7 There is an increase in the expected rate of inflation there will be more supplied less demanded 8 Show why corporate bonds have a higher interest rate than U S Treasuries
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Unformatted text preview: corporate bonds have higher risks meaning the demand is less increasing their interest r 9 Show why did mayors of major cities in the US complained about the Bush tax cuts. the demand on corporate bonds will increase meaning that the demand for muni's decre 10 If there is an excess demand for bonds, is the price above or below the equilibrium rate? Explain any price adjustment. the price is below the equilibrium price. Because the quantity demanded is high than the 11 People's wealth increases and the government runs a larger deficit. G increases (borrows more), W increases, supply and demand both increase 12 The rating on bonds issued by WorldCom is reduced from A to Ba by Moody's. risk increases the amount quantiy demanded decreases , b, expected inflation +, ei + , r, l , expected inflation and interest) L+ it- it -will need to issue less supply rates ease e price supplied...
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Supply Damand questions - corporate bonds have higher risks...

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