Please draw the curve

(c) (4 pts) Suppose the government issues bonds to finance the construction of a statue in honor of the benevolent leader Chris will affect the loanable funds and the bond markets. Draw two separate graphs. Solution: 1 pt correct graphs with labels (each), 1 pt correct curve shifting (each). (d) (2 pts) Assume that prior to this issuance of bonds there was zero government borrowing before the con- struction of Pheland's leader glorious effigy. Illustrate the effect that this will have on private borrowing, using a detailed graph and name this phenomenon. Solution: 1 pt correct graphs with labels, 1 pt correctly identifying crowding out.1. Market for Loanahle Funds and the Bond Market This question asks you to illustrate the dynamics of the loanhale funds and bond markets for the the government of Pheland is considering issuing some bonds to nance the construction of a statue in honor of its great leader. (a) {2 p13] First, a zerocoupon bond with maturity of one year is considered. Each bond will have a face value of $1200. while the prevailing interest rate is 20%. What is the price of each bond? Write dcwvn the zero-ooupon bond pricing formula for full credit. Solution: Standard answer. 1 pt for formula, 1 pt for P = $1000. (b) [2 pis] Then. a bond with a ooupon rate of 10% and a face value of $1000 is considered. The prevailing interest rate is still 20% and maturity is in 5 years. Write down the pricing formula for this bond. assu m ing a coupon is paid in all years [including the 5th and 1st year]. Feel free to leave your answer as an equation, you need not explicitly calculate the exact number. Salution: Standard