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- what are four different factors that would increase a bonds price, but not by interest rates or yields. I would like at least 2 from both the supply and demand side of the market.What will happen in the bond market if the government imposes a limit on the amount of daily transactions? Which characteristic of an asset would be affected? How might it affect the interest rates. Explain with a graph. I want to see the answer to this question and steps. ThanksWhat will happen in the bond market if the government imposes a limit on the amount of daily transactions? Which characteristic of an asset would be affected? How might it affect the interest rates. Explain with a graph.
- What is the relation between Cash Flow Risk and Interest Rate Risk in the Bond Market? Please explain it clearly so that I can easily understand. Thankyou.What will happen in the bond market if the government imposes a limit on the amount of daily transactions?Which characteristic of an asset would be affected? How might it affect the interest rates?Explain the bond markets in the real world.
- Draw the supply and demand curves for the bond and explain what will happen to the equilibrium price and quantity of the bond for each of the following situations: a) The inflation rate is expected to increase. b) The wealth of economic agents in the economy increases, but at the same time, the Ministry of Finance increases the corporate income tax rate. c) The economy is experiencing expansion. d) The government runs a budget deficit. e) Most corporate bonds (ratings) have been downgradedMarket interest rates are established by the banks or any financial institutions. True or false?A shift in the demand curve for bonds occurs when the quantity demanded changes at each given interest rate. When a shift takes place, there will be a new equilibrium value for the interest rate. Explain how risk and liquidity may result in a shift in the demand for bonds.
- Question #2: Supply and Demand in the Bond Market Graphically illustrate using the bond market the impact that each of these scenarios will have on the price of the 30 year corporate bond. Be sure to label your axis and curves in each of your graphs. In each graph indicate the initial equilibrium as Point "A" and the new equilibrium as Point "B". (a) Investors expect interest rates to fall in the future. (b) Trading volumes in 30 year corporate bonds decreases making them harder to sell. (c) Expected inflation increases. (d) The government budget deficit has decreased.Understanding the price of bonds and interest rates. The remarkable thing about the events described in the article is that the yield on the 3-month T-bill was briefly negative. To see how this could happen, consider the relationship between bond prices and bond yields. A 3-month T-bill with a maturity value of $1,000 is just a piece of paper that entitles the holder to $1,000 in three months. For example, if you were to buy a 3-month T-bill on September 24, 2008, with a maturity value of $1,000 and 90 days left to maturity, the U.S. government would pay you $1,000 on December 23, 2008. In general, the price of a bond is less than its maturity value. That is, if you are going to give up a certain amount of money for the duration of the bond, you expect to be paid for this loss of liquidity and compensated for inflation that could reduce the value of the repayment at the end of the period. Therefore, a piece of paper entitling you to $1,000 on December 23 would usually be worth less…Why are bond prices and interest rates inversely related?