The demand for a bond decreases and the supply for that bond increases. As a result,...
The demand for a bond decreases and the supply for that bond increases. As a result, in equilibrium, the stock of that bond in the financial system ___________ while its yield __________ .
A. may increase or decrease; decreases
B. may increase or decrease; increases
C. increases; may increase or decrease
D. decreases; decreases
Homework Answers
When demand for bond decreases and supply increases, sellers are ready to sell securities at lower price. The stock for such securities may increase or decrease. The yield for the same security must increase as buyer for the bond has to pay less which in turn increases the yield.
Thus, correct option is B.
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