5. The demand curve and supply curve for one-year discount bonds were estimated using the follow- ing

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5. The demand curve and supply curve for one-year discount bonds were estimated using the follow- ing equations: B: Price = Quantity + 940 B: Price Quantity + 500 Following a dramatic increase in the value of the stock market, many retirees started moving money out of the stock market and into bonds. This resulted in a parallel shift in the demand for bonds, such that the price of bonds at all quantities increased $50. Assuming no change in the supply equation for bonds, what is the new equilibrium price and quantity? What is the new market inter- est rate?

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Financial Markets and Institutions

ISBN: 978-0321280299

5th edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

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