The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £) as a function of the price of the bond is S = 2P + 400.     b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens

ENGR.ECONOMIC ANALYSIS
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The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and
two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of
£) as a function of the price of the bond is S = 2P + 400.

 

 

b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity
demanded/supplied at this interest rate? What happens to the demand/supply of the bond as
the interest rate increases? Explain why. 
c) What is the equilibrium interest rate?

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hey im confused. when i enter this into my calculator 50/(1+0.05) + 50/(1+0.05)2 + 1000/(1+0.05)2  i get a 1000.so shouldnt quantity demanded be 2000?  

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