Markets and Financial Institutions Homework # 2 Instructions: Answer the following questions. Make sure to show all your work. TOTAL: 100 points Consider the following supply and demand for money of an economy: MS-400 +20i MD- 2000 30i Find the equilibrium interest rate. 1. Consider the following savings and investment functions of an economy: S- 40+ 5i I-400-3i Find the equilibrium interest rate. 2. 3. Consider the following Treasury quote: 104-13+/24+. If you are the seller of the bond, at what price will you sell? Consider a bond paying an annual coupon of $80 with a face value of S1,000. Calculate the yield to maturity if the bond has 20 years remaining to maturity and is 4. priced at $1,200. What would be the holding period yield if the bond is held for 15 years and sold at $1,100? Suppose that you bought a 14% Drexler bond with time to maturity of 9 years for $1,379.75 (semiannual coupons, interest rate-896). After another l' year, you sold the bond. 5. Assuming that the required rate of retum remained at 8%, what would the selling price be? What is the rate of return from this investment? Assuming that the required rate of return decreased to 75%, what would the selling price be? What is the rate of return from this investment? b. FT F8 19 F4 F5