Question: Let's say you own a firm that produces and sells Ping-Pong tables. The name of your company is iPong because your tables have a plug-in jack for all Apple products. To finance a new factory, you decide to sell bonds. Your bonds are rated BBB.
a. Draw supply and demand curves for your iPong bonds. (The quantity of bonds is measured along the x axis, and the price along the y axis.) Label the supply curve S, the demand curve D, and the equilibrium price p.
b. How will the demand for iPong bonds be affected if a new secondary market agrees to buy and sell iPong bonds? Illustrate the new demand curve in the graph above, and label it DSM. How will this affect the price and interest rate on iPong bonds?