20 points. Consider the market for 1-year T-bills. Suppose that the demand curve for T-bills is given by the following e

[answerhappygod]

20 Points Consider The Market For 1 Year T Bills Suppose That The Demand Curve For T Bills Is Given By The Following E 1 (42.84 KiB) Viewed 95 times

20 points. Consider the market for 1-year T-bills. Suppose that the demand curve for T-bills is given by the following equation: Q! = 3000 -0.25* P, where QP stands for "quantity of T-bills demanded" and P, stands for "price of a T-bill". Supply of T-bills is fixed and equal to QS = 2500. (a) Draw a graph that describes this market for T-bills. Make sure you label correctly both axes. Identify the equilibrium point on the graph. (b) Find the numerical value for the equilibrium price of the T-bill (the price is in USD). HINT: this is just a demand-supply problem as you have seen in microeconomics. (c) Suppose that this T-bill will pay $2100 at maturity (this is its par value). What is its NET rate of return? (d) Suppose that, because of an open market operation by the Fed, the supply of T-bills declines. What would happen to the equilibrium price for the T-bill? What to its rate of return (assuming its par value remains unchanged)?