Explain the equilibrium adjustments that would occur in the short-term and long-term bond markets for the following
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Explain the equilibrium adjustments that would occur in the short-term and long-term bond markets for the following cases:
a. Investors in corporate securities, on average, prefer short-term to long-term instruments, whereas corporations have greater financial requirements to finance long-term assets than short-term, and therefore prefer to issue more long-term bonds than short-term.
b. Investors in corporate securities, on average, prefer long-term to shortterm instruments, whereas corporations have a greater need to finance short-term assets than long-term, and therefore prefer to issue more shortterm bonds than long-term.
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