$10,000$9,800$9,600$9,400$9,200$9,0008 $8,800E $8,600$8,400$8,200$8,000$7,800$7,600$7,400$7,200$7,000$0S$50$100 $150 $200 $250 $300 $350$400$450$millionThe graph above shows the market for a one-year discount bond with a face value of$10,000. The government's budget deficit increases by $150 million and to financethat deficit it borrows that amount in this market. In other words, the governmentsells $150 million worth of this particular kind of bond in the market. This results inthe interest rate on this bond to change to X percent, approximately. What is X?0.22Bond Price

Intersection of demand and supply of bond determines its price and price of bond and interest rate…

$10,000 $9,800 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 $0 S $50 $100 $150 $200 $250 $300 $350 $400 $450 $million he graph above shows the market for a one-year discount bond with a face value of 10,000. The government's budget deficit increases by $150 million and to finance Bond Price

$10,000 $9,800 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 $0 S $50 $100 $150 $200 $250 $300 $350 $400 $450 $million he graph above shows the market for a one-year discount bond with a face value of 10,000. The government's budget deficit increases by $150 million and to finance Bond Price

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter23: Managing Vertical Relationships

Section: Chapter Questions

Problem 1MC

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