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BE. [15 marks} The demand curve and supply curve for a threeyear Treasury discount bond with a face value of $2,000 are represented by the
BE. [15 marks} The demand curve and supply curve for a threeyear Treasury discount bond with a face value of $2,000 are represented by the following equations: - Bd: Price = 2900 3 X Quantity - 3': Price = 380 + 4.2 x Quantity (21] {4 marks) 1What is the expected equilibrium price and quantity ofbonds in this market? (b) (3 marks] Given your answer to part (a), what is the expected interest rate in this market? (c) {5 marks) To boost the postrecession economy, suppose that the REA conducts an open market purchase, and buys 90 units of the threeyear Treasury discount bond to the market. Everything else held constant, calculate the new equilibrium interest rate as a result of the RBA's action. (it) {3 marks) Is it possible for a discount bond to have a negative nominal interest rate? Explain your
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