Increase in demand is larger than increase in supply of bond

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Reference no: EM131003105

Consider the market for bonds in the secondary market. Predict what would happen to the price of the bonds and the interest rate for each of the following scenarios:

a) Savers consider that stocks are riskier than bonds.

b) Both the demand and supply of bonds increase, but the increase in demand is larger than the increase in supply of bonds.

c) Borrowers expect higher profitability of their projects while savers become very pessimistic about the future of the economy.

Reference no: EM131003105

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