What do you think the price of the bond will be

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Suppose that in the economy described in Test Yourself 1, interest rates suddenly fall to 3%. What will happen to the price of the bond that pays $3 per year? (Suppose that interest rates are 6% in the economy and a safe bond promises to pay $3 per year in interest forever. What do you think the price of the bond will be? Why?)

Reference no: EM13213067

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