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Bond Price = C* (1-(1+r)-n/r ) + F/(1+r)n F = Face / Par value of bond, r = Yield to maturity (YTM) and. n = No. of periods till maturity.
An increase in y raises the demand for money, an increase in R reduces the demand for money, and an increase in w raises the demand for money. By the budget constraint (4), the demand for money sets the demand for bonds, bd = w?md = w?(10y?5R+.
Also referred to as a bond's coupon rate, the nominal yield is the annual income divided by the bond's face value. For example, a bond with a $1,000 face value that pays $50 annually has a nominal yield of 5% (50 ÷ 1,000 = 0.05).
The bond demand curve is the relationship between the price and the quantity of bonds that investors demand, all else equal. The price of bonds is inversely related to the yield, the demand curve implies that the higher the demand for bonds, the higher the yield. The bond demand curve slopes downward.
An increase in y raises the demand for money, an increase in R reduces the demand for money, and an increase in w raises the demand for money. By the budget constraint (4), the demand for money sets the demand for bonds, bd = w?md = w?(10y?5R+.