1. What will happen in the bond market if the government imposes a limit on the amount of daily transactions? Which characteristic of an asset would be affected?

A. Riskiness of bonds relative to other assets will decrease, increasing the interest rate and increasing bond's prices.

B. Liquidity of bonds relative to other assets will increase, decreasing the interest rate and lowering bond's prices.

C. Riskiness of bonds relative to other assets will increase, decreasing the interest rate and increasing bond's prices.

D. Liquidity of bonds relative to other assets will decrease, increasing the interest rate and lowering bond's prices.

2. Suppose that many big corporations decide not to issue bonds, since it is now too costly to comply with new financial market regulations.

Can you describe the expected effect on interestrates?

A. The impact will translate into a shift to the right in the demand curve, decreasing bond's prices (increasing interestrates) and increasing the quantity of bonds bought and sold in the market.

B. The impact will translate into a shift to the left in the supply curve, increasing bond's prices (lowering interestrates) and lowering the quantity of bonds bought and sold in the market.

C. The impact will translate into a shift to the right in the supply curve, decreasing bond's prices (increasing interestrates) and increasing the quantity of bonds bought and sold in the market.

D. The impact will translate into a shift to the left in the demand curve, increasing bond's prices (lowering interestrates) and lowering the quantity of bonds bought and sold in the market.

3. The demand curve and supply curve for one-year discount bonds with a face value of $1,040 are represented by the following equations:

Bd:Price=0.6Quantity+1,140

Bs:Price=Quantity+690

The expected equilibrium quantity of bonds is .(Round your response to the nearest whole number.)

The expected equilibrium price of bonds is $. (Round your response to the nearest whole number.)

The expected interest rate in this market is %.(Round your response to two decimal places.)