Consider a discount bond which will mature in one year and has a $1000 face value. Suppose the current supply curve of this bond is 2P=3Q+1800, and the current demand curve is P=2/7*Q+999.

Which of the following is correct? Assume that you can only invest in this discount bond or a stock.

Hint: Before you solve systems of equations, think about whether a factor can change the supply or demand curve in a certain direction. For example, is it possible for a decrease in the risk of this discount bond to shift the demand curve of this discount bond to P=2/7*Q+1000? If not, then you should not choose that answer. If it is possible, then you should examine the rest of that answer. There is only one correct answer. If you think there is more than one correct answer, then choose the best one.

		A decrease in stock returns shifts the demand curve of this discount bond to 7*P=-2*Q+6800 and changes the interest rate of the discount bond from 1.71% to 4.17%.
		An increase in the liquidity of the stock shifts the demand curve of this discount bond to 7*P=2*Q+6700 and the supply curve of this discount bond to 2P=3Q+1900, resulting in the change of the interest rate from 1.71% to 4.60%.
		An increase in the risk of the bond shifts the demand curve of this discount bond to P=2/7*Q+1000, while an increase in the government deficit shifts the supply curve of this discount bond to P=3/2*Q+800. As a result, the interest rate increases from 1.71% to 3.31%.
		An increase in the expected inflation rate shifts the demand curve of this discount bond to P=2/7*Q+950 and the supply curve of this discount bond to P=1.5Q+590, resulting in the change of the interest rate from 1.71% to 12.06%.