7-Chp5-Econ3310 - Bond Market Equilibrium Interest Rates...

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Unformatted text preview: Bond Market Equilibrium Interest Rates Market for Money: LPF Equilibrium Interest Rates in LPF F −P P In this case, the interest rate also equals the expected rate of return: i = Re. i= Consider a 1 year discount bond with face value $1000. The interest rate (yield to maturity) is Example: At lower prices (higher interest rates), ceteris paribus, the quantity supplied of bonds is lower: a positive relationship At lower prices (higher interest rates), ceteris paribus, the quantity demanded of bonds is higher : an inverse relationship The Bond Market: Supply and Demand Asset Demand ...
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This note was uploaded on 02/14/2012 for the course ECON 3310 taught by Professor Dix during the Fall '08 term at York University.

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