Analyze each of the following statements and determine whether it is True, False, or Uncertain. Please have strong and thorough supporting arguments. Interest rates and
Analyze each of the following statements and determine whether it is True, False, or Uncertain. Please have strong and thorough supporting arguments. Interest rates and bond prices tend to move together in the same direction overthe long run When the bond interest rate is below equilibrium in a bond supply and demand graph, we should have excess supply of bonds. A business cycle contraction will decrease the demand for bonds and decrease the supply of bonds and decrease the interest rates. According to the expectations theory of the term structure, it is better to invest in oneyear bonds, reinvested over two years, than to invest in a twoyear bond if interest rates on one-year bonds are expected to be the same in both years
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