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AP® Macroeconomics

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Difficult

Secondary Bond Market Prices

APMACR-VEYUKG

Suppose a firm wishes to sell a one-year \$1000 bond that pays 4% interest in the secondary market but the government is now issuing \$1000 bonds at 5%.

The Bond the firm wishes to sell will

A

not be able be to sold until the government offers bonds at that identical interest rate.

B

likely sell at $900.

C

sell at a price $100 higher than face value.

D

likely sell in the secondary market at $800.

E

still sell for $1000.