Calculate the yield to maturity

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Problem - Consider a three-year coupon bond with a coupon rate of 5% and a face value of $1000. The demand curve and the supply curve equations are given as follows:

Bond Demand: P = -Q+1000

Bond Supply: P = 3Q+500

Required -

a. Calculate the yield to maturity (interest rate).

b. Suppose the Central Bank decides to sell 100 bonds. Calculate the new yield to maturity (interest rate).

c. Using the bond demand and supply model, show the old and new equilibriums on a ?gure.

d. Make a comment comparing two equilibriums.

Reference no: EM132995418

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