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Homework answers / question archive / The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively

The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively

Economics

The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively.

 

Bd: P = 1200 - 0.5 Q

Bs: P = 400 + 0.3 Q

Where P = price and Q = quantity.

a.   What is the expected equilibrium price and quantity of bonds in this market?

                                                                                                 

b.   Given your answer to part (a), what is the expected interest rate in this market?

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