PART B The RBA will use open market operations in addition to increasing the cash rate. Assume that a bond with no expiration date pays a fixed $2,400 annual interest and is selling for its face value of $75,000. (i) Calculate the interest yield on the bond. (ii) Will the RBA buy or sell bonds if it uses open market operations? Briefly explain. (iii) As a result of the RBA's decision above which of these two outcomes is more likely or correct? 1. The market value of the bond will increase to $80,000 OR 2. The market value of the bond will decrease to $60,000. In your answer calculate the new interest yield after the RBA's open market operations; show your workings. (iv) Briefly explain why the market value and yield of the bond has changed. (v) Assume that bank deposits increase by $2,500 million as a result of RBA monetary policy. Also assume that banks hold 12.5% of deposits as reserves. Calculate the following: - the banks' excess reserves after the increase in bank deposits; the maximum amount by which the money supply can expand due to credit creation, if banks decide to lend out their excess reserves.