Consider a Hydro Quebec Bond with a Face Value of $1000,and

question 106

Multiple Choice

Consider a Hydro Quebec bond with a face value of $1000,and a present value of $1175.If this bond is offered for sale at $1025,then

• A)excess supply of this bond will drive the price down until it reaches its face value.
• B)individuals will purchase the bond at the offer price which will drive down the price further.
• C)excess demand for this bond will drive the price up until it reaches its equilibrium market price of $1175.
• D)the equilibrium market price of this bond has been achieved.
• E)Hydro Quebec will be forced to change the face value of the bond.

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Definitions:

Government Securities

Financial instruments issued by the government to borrow money from investors that usually come with a promised set of future payments.

Depository Institutions

Financial institutions that accept deposits from the public, such as banks, credit unions, and savings and loan associations.

Money Supply

The total amount of money—cash, coins, and balances in bank accounts—in circulation within a country's economy at a specific time.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, often used as a reference for setting various interest rates.