The demand curve and supply curve for a oneyear corporate coupon bond with a face value of $1000 and coupon rate of 5% are represented by the

answer part b,c………….

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The demand curve and supply curve for a one—year corporate coupon bond with a face value of $1000 andcoupon rate of 5% are represented by the following equations: Demand: P = 1140 – 0.63”Supply: P = T00 + 5’5 where P is the price of the bond, 3“ is the quantity of bonds demanded, and E’5 is the quantity of bondssupplied. a. 1What is the equflihrium price of the bond? [5 points] 1}. 1What is the equilibrium annual yield to maturity on these bonds? [5 points] c. Suppose that the corporate tax rate is reduced from 35% to 15%. In words, what will he the effecton bond supply and f or demand and why? What will he the effect on the bond’s price and yield? [10poinl3]

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