Question: Suppose that the demand and supply schedules for bonds that have a face value of $100 and a maturity date one year hence are as follows:
Price ($) Quantity Demanded Quantity Supplied 100 0 600 95 100 500 90 200 400 85 300 300 80 400 200 75 500 100 70 600 0
1. Draw the demand and supply curves for these bonds, find the equilibrium price, and determine the interest rate.
2. Now suppose the quantity demanded increases by 200 bonds at each price.
3. Draw the new demand curve and find the new equilibrium price. What has happened to the interest rate?