If the federal government were to guarantee a minimum rate of return on corporate bonds, the result would be a
A)decline in the equilibrium interest rate.
B)shift to the left in the supply curve for loanable funds.
C)shift to the left in the demand curve for loanable funds.
D)decline in bond prices.

Question

Quizplus · Accepted Answer

A guarantee on the minimum rate of return on corporate bonds would make them more attractive to investors, increasing the demand for bonds. This increased demand would lower the equilibrium interest rate, as investors would be willing to accept lower returns in exchange for the reduced risk provided by the government guarantee.

If the Federal Government Were to Guarantee a Minimum Rate