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Consider a Government of Canada Bond with a Face Value

Question 2

Multiple Choice

Consider a Government of Canada bond with a face value of $1000,and a present value of $925.If this bond is offered for sale at $960,then


A) the excess demand for the bond at $960 will drive the price up to the face value of the bond.
B) individuals will purchase the bond at the offer price which will drive the market rate of interest up.
C) individuals will purchase the bond at the offer price which will drive the market rate of interest down.
D) the equilibrium market price of this bond has been achieved.
E) the lack of demand for this bond will drive the price down until it reaches its equilibrium market price of $925.

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