Question

Explain: bond prices settle at the level people are willing to hold them. Graph this.

Answer 1

Bond prices settle at the level people are willing to hold them , implies prices are established in the market according to the preferances of consumers.

bond prices arises as a result of intersection of demand and supply curve.

demand curve reflecion how much the consumer is willing to buy at each specific price whereas supply curve reflects how much the producer is willing to supply at each specific price.

so, thus he bond price arises at the intersection of demand and supply cuves. where the shape of these 2 curves represnts all the factors affecting the demand and supply of bonds.

we have price of bond on the vertical axis and the quantity of bonds on the horizontal axis.