Draw a demand and supply graph for bonds that shows the


1. Draw a demand and supply graph for bonds that shows the effect on a bond that has its rating lowered. Be sure to show the demand and supply curves and the equilibrium price of the bond before and after the rating is lowered.

2. How does the interest rate on an illiquid bond compare with the interest rate on a liquid bond? How does the interest rate on a bond with high information costs compare with the interest rate on a bond with low information costs?

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Financial Management: Draw a demand and supply graph for bonds that shows the
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