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Notice the following model of a bond market. In each situation given, describe what happens to the bond price and yield and why. The graph is price of bonds on the vertical axis and quantity on the horizontal axis. With Supply of bonds starting above zero and demand of bonds crossing in the opposite direction

1) A new electronic trading platform makes the trading of corporate bonds much more rapid and transparent.

2) Rising municipal bankruptcies, like that of Detroit, raise concerns about default risk with municipal bonds.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91227383

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