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The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively. B d : P =

The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively.

B^d: P = 1200 - 0.5 Q

B^s: P = 400 + 0.3 Q

Where P = price and Q = quantity.

a.What is the expected equilibrium price and quantity of bonds in this market?

b.Given your answer to part (a), what is the expected interest rate in this market?

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