3. Suppose you are looking to buy a bond that promises to pay $600,000 on the date of maturity in one year. A. If you bid for the bond and wind up paying a price of $590,000, solve for the interest rate on this bond. Round your answer to four decimal places. b. If on the next day, you bid for the bond and pay a price of $575,000, solve for the interest rate on the bond now. Round your answer to four decimal places. C. What is the relationship between the bond price and the interest rate on the bond?

If the price of a government bond (gilt) traded on the stock market rises above its nominal value, which of the following statement must be true?   1 -The bond's coupon falls below the yield   2 - The bond's coupon rises above the yield 3-the bond's yield rises above the coupon 4 - the bond's yield falls below the coupon

The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £)as a function of the price of the bond is S = 2P + 400. b)  Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens to the demand/supply of the bond as the interest rate increases? Explain why.  c)  What is the equilibrium interest rate?  d)  Suppose that the bond trades at premium. Is there excess demand or supply? Explain. e)  There is a business cycle contraction, so both supply and demand shifts. After the shift, the new demand curve is given by: D = 4000 + X − 2P , whereas the new supply curve is S = 2P + 200. For which values of X will the interest increase/decrease? Which values of X are in line with empirical data?

What determine the Structure of Interest Rates and name the three primary shapes of the Structure of Interest Rates?

Calculate the future value of $500 four years from now based on the following scenarios. Instructions: Enter your answers rounded to 2 decimal places. a. What is the future value of $500 four years from now if the interest rate is 5 percent? %24 b. Suppose that the interest rate is 7 percent. What is the future value of the payment four years from now?