SOLUTIONj MANUALj FOR
Money,jBanking,jFinancialjMarketsj&jInstitutionsj2ndjEditionjforjBrandljMichael
Chapterj2-24
CHAPTERj2:jMoney,jMoneyjSupply,jandjInterest
2-1 jSectionjReview
1. Whatjisjthejdifferencejbetweenjmoneyjandjcurrency?jWhenjarejtheyjthejsame?jWhyjmightjtheyjbejdif
ferent?
ANS:jMoneyjisjanythingjgenerallyjacceptedjinjexchangejforjgoodsj&jservices.jCurrencyjisjissuedjbyjajbankjo
rjthejgovernment,jbutjcurrencyjisjnotjnecessarilyjmoney.jTheyjarejthejsamejwhenjtheyjare
acceptedjinjexchangejforjgoodsjandjservices.jCurrenciesjcanjstopjbeingjmoneyjifjpeoplejdon’tjacceptjthemji
njexchangejforjgoodsjandjservices.jIfjajgroupjofjpeoplejstopjusingjcurrencyjtojgetjgoodsjandjservicesjbutjins
teadjusejbananas,jthenjthejbananasjarejthejmoney.
2. Howjmanyjpricesjmustjajbarterjeconomyjhavejifjthejeconomyjhasjfourjgoods?jWhatjifjitjhasj400jgo
ods?jExplainjwhyjhavingjajmoneyjinjthejsecondjcasejisjbeneficial.
ANS:j4jgoodsj=j6jprices;j400jgoodsj=j79,800jprices.jMoneyjallowsjusjtojspecializejandjreducejourjsearchjcos
t.j Moneyjallowsjusjtojreducejthejnumberjofjstatedjpricesjwejneed.
3. Youjreadjajnewsjstoryjaboutjajcountryjthatjisjsufferingjfromjrapid,jongoingjincreasesjinjthejcostjofjlivi
ng.jWhichjcharacteristicjofjmoneyjisjbeingjdirectlyjnegativelyjimpactedjinjthatjeconomy?
a. Unitjofjaccount
b. Mediumjofjexchange
c. Storejofjvalue
d. Doublejcoincidencejofjwantsj
ANS:j C
2-2 jSectionjReview
1. Bobbyjisjconfused.jHejstates:j“Sincejprisonersjarejnotjallowedjtojsmokejinjprisonsjanyjlonger,jRadfor
d’sj examplesjofjcigarettesjinjPOWjcampsjnojlongerjapplies.”jHowjwouldjyoujexplainjtojBobbyjhowjRadf
ord’sjstoryjdemonstratesjthejconceptsjofjthejcriteriajofjmoney,jasjwelljasjthejimportancejofjchangesjinjt
hejmoneyjsupply?
ANS:j Anyjassetjthatjisjablejtojbejstandardized,jdivisible,jdurablejandjinjdemandjcouldjbejcurrency,jasjlongj
asjitjisjajmediumjofjexchange,jisjajunitjofjaccountjandjhasjstorejofjvalue.j Cigarettesjwerejmoney.
,2. ProponentsjofjthejGoldjStandard,jorjusingjgoldjasjmoney,joftenjarguejthatjitjwilljkeepjinflationjunderjco
ntrol.jHowjdoesjthejexperiencejofjEuropejinjthejsixteenthjcenturyjraisejdoubtsjaboutjthatjclaim?
ANS:j Ifjpeoplejstartjtojhoardjgoldjorjsilver,jtherejmayjnotjbejenoughjmoney,jandjanjeconomyjcouldjslidejin
tojrecession.j Ifjgoldjorjsilverjincreasesjtoojrapidlyjthejeconomyjcouldjsufferjinflation.
3. RicardojandjFriedmanjagreejthatjifjthejmoneyjsupplyjincreasesj“toojquickly”jthejfollowingjhappens:
a. Thejratejofjinflationjdecreases.
b. Thejratejofjrealjeconomicjgrowthjincreases.
c. Thejratejofjinflationjincreases.
d. Thejleveljofjemploymentjdecreases.
ANS:jC
2-3 jSectionjReview
1. Ajcriticjofjmoneyjeconomicsjoncejstated,j“ifjyoujcannotjmeasurejthejmoneyjsupplyjaccurately,jitjisjno
tjworthjdiscussingjatjall.”jHowjwouldjyoujrefutejthisjstatement?
ANS:jDuejtojchangesjinjfinancialjmarkets,jfinancialjinnovationjandjchangesjinjthejwayjbanksjoperate,jledjt
ojthejdeclinejinjthejusefulnessjofjM2jasjajmonetaryjaggregate.
2. Economistsjarejsearchingjforjaj“good”jmeasurementjofjthejmoneyjsupply.jWhatjconstitutesjajgoodjm
easurementjofjthejmoneyjsupply?
ANS:jTojeconomists,jaj“good”jmeasurementjofjthejmoneyjsupplyjisjonejthatjconformsjtojeconomicjtheorie
sjregardingjinflationjandjthejeconomy.jForjexample,jifjthejmoneyjsupplyj(accordingjtojajparticularjmeasure
ment)jincreasesjfasterjthanjthejgrowthjratejofjthejeconomy,jthenjeconomicjtheoryjsuggestsjthatjinflationjs
houldjoccur.jOnjthejotherjhand,jifjthejmoneyjsupplyj(accordingjtojajparticularjmeasurement)jincreasesjtoo
jslowlyjrelativejtojthejgrowthjratejofjthejeconomy,jthenjeconomicjtheoryjsuggestsjthatjthisjwilljresultjinjajr
ecession.jWhenjthejmeasurementjofjthejmoneyjsupplyjcoincidesjwithjthesejeconomicjpredictions,jthenjth
atjparticularjmeasurementjhasjthejpotentialjtojbejaj“good”jmeasurementjofjthejmoneyjsupply.jDuringjcert
ainjperiodsjofjtime,jbothjM1jandjM2jhavejbeenjconsideredjtojbej“good”jmeasurementsjofjthejmoneyjsupp
ly.jHowever,jtherejhavejalsojbeenjperiodsjofjtimejwherejthejchangesjinjM1jorjM2jdidjnotjcoincidejwithjeco
nomicjtheory.
3. Whichjofjthejfollowingjisjthejbroadestjorjmostjinclusivejmeasurementjofjthejmoneyjsupply?
a. M1
b. M2
c. M3
d. M0
ANS:j B
,2-4 jSectionjReview
1. Eachjpersonjmightjhavejajdifferentjtimejpreference.jExplainjwhyjanjolderjpersonjmightjhavejajhigherjorjl
owerjtimejpreferencejthanjajyoungjperson.
ANS:jAnjolderjpersonjmightjhavejajhighjtimejpreference,jconsumerjnowjvs.jinjthejfuture.j Thejolderjpersonj
willjplacejhigherjvaluejonjthejabilityjtojconsumejnowjmorejthanjmoneyjinjthejfuture.
2. Whatjisjthejfuturejvaluejofj$500jinjtwojyearsjifjthejinterestjratejisj4%?jHowjwouldjyoujexplainjthisjtojso
meonejwhojhasjnojtrainingjinjeconomics?
ANS:j500(1.04)2j=j$540.80.jForjsomeonejwithoutjajbackgroundjinjeconomics,jonejcouldjexplainjthatjmone
yjinvestedjtodayjwilljgrowjoverjtime.jThus,jinjorderjtojhavej$500jinjthejfuture,jtodayjyoujwouldjonlyjneedjt
ojinvestjsomejamountjthatjisjlessjthanj$500.jHowjmuchjlessjdependsjonjthejreturnjonjyourjinvestmentj(thej
interestjrate).
3. Ifjthejannualjinterestjratejisj2%,jwhatjisjthejquarterlyjinterestjrate?
a. 0.0204
b. 0.0166
c. 0.005
d. 0.001
ANS:j C
CHAPTERj3:jBondsjandjLoanablejFunds
3-1 jSectionjReview
1. Today,jshoppersj“clipjcoupons”jbeforejtheyjgojshopping.jExplainjhowjthesejmodernjcouponsjarejsi
milarjandjdissimilarjtojthej“coupons”jreferredjtojinjthejbondjmarket.
ANS:jToday,jthough,jmostjbondsjarejnotjphysicaljprintedjpiecesjofjpaperjwithjcouponsjthatjmustjbejclipped
joffjandjmailedjtojthejissuer.
2. Thejfactjthatjthejfacejvaluejofjajbondjdoesjnotjchangejoverjthejlifejofjthejbondjisjgenerallyjco
nsideredjajbenefitjtojthejborrower.jCanjyoujexplainjwhy?
ANS:jIfjthejmarketjconditionsjchange,jsayjratesjdrop,jthejfacejvaluejwilljnotjchange.
3. Thejratejofjinterestjajbondjpaysjisjcalledjthejbond’s:
a. facejvalue.
b. couponjrate.
c. bondjrating.
d. ratingjrate.
, ANS:j B
3-2 jSectionjReview
1. Ifjyoujhavejajbondjwithjajfacejvaluejofj$1,000jandjajcouponjratejofj2.25%,jbutjthejmarketjinterestjrat
ejforjsuchjbondsjisj2.5%,jwilljyourjbondjselljatjpar,jatjajpremium,jorjatjajdiscount?jExplainjwhy.
ANS:jWhenjmarketjinterestjratesjrisejrelativejtojcouponjratesjonjexistingjbonds,jthejpricejofjthesejexistingj
bondsjdecreasejbelowjfacejvalue.jThisjmeansjthatjthisjbondjwilljbejsoldjatjajdiscount,jsincejthejmarketjpric
ejisjbelowjthejfacejvaluejofjthejbond.
2. Ifjyoujhavejajbondjwithjajfacejvaluejofj$1,000jandjajcouponjratejofj2.5%,jbutjthejmarketjinterestjrat
ejforjsuchjbondsjisj2.25%,jwilljyourjbondjselljatjpar,jatjajpremium,jorjatjajdiscount?jExplainjwhy.
ANS:jPremiumjbecausejthejcouponjratejisjlessjthanjthejmarketjrate.
3. Ifjajthree-
yearjbondjwithjaj$1,000jfacejvaluejhasjajcouponjratejofj3.5%,jandjthejcurrentjmarketjinterestjratejisj
2%,jwhatjisjthejmarketjpricejofjthejbond?
a. $956.75
b. $1,035.00
c. $1,043.30
d. $1,148.34
jANS:j c
3-3 jSectionjReview
1. Youjreadjinjthejfinancialjpressjthatjmarketjparticipantsjexpectjstockjpricesjtojincreasejdramaticallyjinjth
ejnearjfuture,jwhilejatjthejsamejtimejbusinessjconfidencejisjincreasing.jExplainjinjwordsjandjshowjgraphic
allyjwhatjwilljhappenjinjthejbondjmarketjifjthejfirstjchangejisjlargerjinjmagnitudejthanjthejsecond.
ANS:jStocksjandjbondsjarejconsideredjsubstitutes,jthejreturnjonjholdingjstocksjarejgoingjtojincrease,jyouj
dojnotjwantjtojholdjbonds.j Demandjforjbondsjwilljfall,jrelativejreturnjtojbondsjisjdeclining.
Businessjconfidencejisjincreasingjsojfirmsjarejgoingjtojfundjmorejprojects.j Theyjwilljneedjtojborrowjmorej
money,jorjselljmorejbondsjtojraisejthosejfunds.j Thejsupplyjofjbondsjisjincreasing.j Duejtojthejdecreasejinjd
emandjforjbondsjisjbiggerjthanjthejsecond,jwejcanjconcludejequilibriumjpricejwilljfalljandjequilibriumjquan
tityjwilljincrease.
2. Storiesjappearjinjthejfinancialjpressjreportingjtwojeconomicjdevelopments:jWealthjlevelsjinjthejUnit
edjStatesjarejincreasing,jwhilejatjthejsamejtimejthejrelativejriskinessjofjbondsjissuedjbyjAmericanjcorpor
ationsjisjdecreasing.jExplainjinjwordsjwhatjwilljhappenjinjthejUSjbondjmarketjbecausejofjthesejtwojeven
ts.
ANS:jIncreasingjwealthjlevelsjcausejanjincreasejinjthejdemandjforjbondsjbecausejhouseholdsjcanjusejthisj
wealthjnotjonlyjtojincreasejconsumptionjbutjalsojsave.jSomejportionjofjthesejnewjsavingsjwilljfind
itsjwayjintojthejbondjmarketjasjhouseholdsjwilljpurchasejmorejbondsjatjeveryjprice.jAtjthejsamejtime,
ifjdefaultjriskjdecreases,jsaversjwilljbuyjmorejbondsjasjtheyjarejconsideredjajrelativelyjsaferjasset.jSo,
Money,jBanking,jFinancialjMarketsj&jInstitutionsj2ndjEditionjforjBrandljMichael
Chapterj2-24
CHAPTERj2:jMoney,jMoneyjSupply,jandjInterest
2-1 jSectionjReview
1. Whatjisjthejdifferencejbetweenjmoneyjandjcurrency?jWhenjarejtheyjthejsame?jWhyjmightjtheyjbejdif
ferent?
ANS:jMoneyjisjanythingjgenerallyjacceptedjinjexchangejforjgoodsj&jservices.jCurrencyjisjissuedjbyjajbankjo
rjthejgovernment,jbutjcurrencyjisjnotjnecessarilyjmoney.jTheyjarejthejsamejwhenjtheyjare
acceptedjinjexchangejforjgoodsjandjservices.jCurrenciesjcanjstopjbeingjmoneyjifjpeoplejdon’tjacceptjthemji
njexchangejforjgoodsjandjservices.jIfjajgroupjofjpeoplejstopjusingjcurrencyjtojgetjgoodsjandjservicesjbutjins
teadjusejbananas,jthenjthejbananasjarejthejmoney.
2. Howjmanyjpricesjmustjajbarterjeconomyjhavejifjthejeconomyjhasjfourjgoods?jWhatjifjitjhasj400jgo
ods?jExplainjwhyjhavingjajmoneyjinjthejsecondjcasejisjbeneficial.
ANS:j4jgoodsj=j6jprices;j400jgoodsj=j79,800jprices.jMoneyjallowsjusjtojspecializejandjreducejourjsearchjcos
t.j Moneyjallowsjusjtojreducejthejnumberjofjstatedjpricesjwejneed.
3. Youjreadjajnewsjstoryjaboutjajcountryjthatjisjsufferingjfromjrapid,jongoingjincreasesjinjthejcostjofjlivi
ng.jWhichjcharacteristicjofjmoneyjisjbeingjdirectlyjnegativelyjimpactedjinjthatjeconomy?
a. Unitjofjaccount
b. Mediumjofjexchange
c. Storejofjvalue
d. Doublejcoincidencejofjwantsj
ANS:j C
2-2 jSectionjReview
1. Bobbyjisjconfused.jHejstates:j“Sincejprisonersjarejnotjallowedjtojsmokejinjprisonsjanyjlonger,jRadfor
d’sj examplesjofjcigarettesjinjPOWjcampsjnojlongerjapplies.”jHowjwouldjyoujexplainjtojBobbyjhowjRadf
ord’sjstoryjdemonstratesjthejconceptsjofjthejcriteriajofjmoney,jasjwelljasjthejimportancejofjchangesjinjt
hejmoneyjsupply?
ANS:j Anyjassetjthatjisjablejtojbejstandardized,jdivisible,jdurablejandjinjdemandjcouldjbejcurrency,jasjlongj
asjitjisjajmediumjofjexchange,jisjajunitjofjaccountjandjhasjstorejofjvalue.j Cigarettesjwerejmoney.
,2. ProponentsjofjthejGoldjStandard,jorjusingjgoldjasjmoney,joftenjarguejthatjitjwilljkeepjinflationjunderjco
ntrol.jHowjdoesjthejexperiencejofjEuropejinjthejsixteenthjcenturyjraisejdoubtsjaboutjthatjclaim?
ANS:j Ifjpeoplejstartjtojhoardjgoldjorjsilver,jtherejmayjnotjbejenoughjmoney,jandjanjeconomyjcouldjslidejin
tojrecession.j Ifjgoldjorjsilverjincreasesjtoojrapidlyjthejeconomyjcouldjsufferjinflation.
3. RicardojandjFriedmanjagreejthatjifjthejmoneyjsupplyjincreasesj“toojquickly”jthejfollowingjhappens:
a. Thejratejofjinflationjdecreases.
b. Thejratejofjrealjeconomicjgrowthjincreases.
c. Thejratejofjinflationjincreases.
d. Thejleveljofjemploymentjdecreases.
ANS:jC
2-3 jSectionjReview
1. Ajcriticjofjmoneyjeconomicsjoncejstated,j“ifjyoujcannotjmeasurejthejmoneyjsupplyjaccurately,jitjisjno
tjworthjdiscussingjatjall.”jHowjwouldjyoujrefutejthisjstatement?
ANS:jDuejtojchangesjinjfinancialjmarkets,jfinancialjinnovationjandjchangesjinjthejwayjbanksjoperate,jledjt
ojthejdeclinejinjthejusefulnessjofjM2jasjajmonetaryjaggregate.
2. Economistsjarejsearchingjforjaj“good”jmeasurementjofjthejmoneyjsupply.jWhatjconstitutesjajgoodjm
easurementjofjthejmoneyjsupply?
ANS:jTojeconomists,jaj“good”jmeasurementjofjthejmoneyjsupplyjisjonejthatjconformsjtojeconomicjtheorie
sjregardingjinflationjandjthejeconomy.jForjexample,jifjthejmoneyjsupplyj(accordingjtojajparticularjmeasure
ment)jincreasesjfasterjthanjthejgrowthjratejofjthejeconomy,jthenjeconomicjtheoryjsuggestsjthatjinflationjs
houldjoccur.jOnjthejotherjhand,jifjthejmoneyjsupplyj(accordingjtojajparticularjmeasurement)jincreasesjtoo
jslowlyjrelativejtojthejgrowthjratejofjthejeconomy,jthenjeconomicjtheoryjsuggestsjthatjthisjwilljresultjinjajr
ecession.jWhenjthejmeasurementjofjthejmoneyjsupplyjcoincidesjwithjthesejeconomicjpredictions,jthenjth
atjparticularjmeasurementjhasjthejpotentialjtojbejaj“good”jmeasurementjofjthejmoneyjsupply.jDuringjcert
ainjperiodsjofjtime,jbothjM1jandjM2jhavejbeenjconsideredjtojbej“good”jmeasurementsjofjthejmoneyjsupp
ly.jHowever,jtherejhavejalsojbeenjperiodsjofjtimejwherejthejchangesjinjM1jorjM2jdidjnotjcoincidejwithjeco
nomicjtheory.
3. Whichjofjthejfollowingjisjthejbroadestjorjmostjinclusivejmeasurementjofjthejmoneyjsupply?
a. M1
b. M2
c. M3
d. M0
ANS:j B
,2-4 jSectionjReview
1. Eachjpersonjmightjhavejajdifferentjtimejpreference.jExplainjwhyjanjolderjpersonjmightjhavejajhigherjorjl
owerjtimejpreferencejthanjajyoungjperson.
ANS:jAnjolderjpersonjmightjhavejajhighjtimejpreference,jconsumerjnowjvs.jinjthejfuture.j Thejolderjpersonj
willjplacejhigherjvaluejonjthejabilityjtojconsumejnowjmorejthanjmoneyjinjthejfuture.
2. Whatjisjthejfuturejvaluejofj$500jinjtwojyearsjifjthejinterestjratejisj4%?jHowjwouldjyoujexplainjthisjtojso
meonejwhojhasjnojtrainingjinjeconomics?
ANS:j500(1.04)2j=j$540.80.jForjsomeonejwithoutjajbackgroundjinjeconomics,jonejcouldjexplainjthatjmone
yjinvestedjtodayjwilljgrowjoverjtime.jThus,jinjorderjtojhavej$500jinjthejfuture,jtodayjyoujwouldjonlyjneedjt
ojinvestjsomejamountjthatjisjlessjthanj$500.jHowjmuchjlessjdependsjonjthejreturnjonjyourjinvestmentj(thej
interestjrate).
3. Ifjthejannualjinterestjratejisj2%,jwhatjisjthejquarterlyjinterestjrate?
a. 0.0204
b. 0.0166
c. 0.005
d. 0.001
ANS:j C
CHAPTERj3:jBondsjandjLoanablejFunds
3-1 jSectionjReview
1. Today,jshoppersj“clipjcoupons”jbeforejtheyjgojshopping.jExplainjhowjthesejmodernjcouponsjarejsi
milarjandjdissimilarjtojthej“coupons”jreferredjtojinjthejbondjmarket.
ANS:jToday,jthough,jmostjbondsjarejnotjphysicaljprintedjpiecesjofjpaperjwithjcouponsjthatjmustjbejclipped
joffjandjmailedjtojthejissuer.
2. Thejfactjthatjthejfacejvaluejofjajbondjdoesjnotjchangejoverjthejlifejofjthejbondjisjgenerallyjco
nsideredjajbenefitjtojthejborrower.jCanjyoujexplainjwhy?
ANS:jIfjthejmarketjconditionsjchange,jsayjratesjdrop,jthejfacejvaluejwilljnotjchange.
3. Thejratejofjinterestjajbondjpaysjisjcalledjthejbond’s:
a. facejvalue.
b. couponjrate.
c. bondjrating.
d. ratingjrate.
, ANS:j B
3-2 jSectionjReview
1. Ifjyoujhavejajbondjwithjajfacejvaluejofj$1,000jandjajcouponjratejofj2.25%,jbutjthejmarketjinterestjrat
ejforjsuchjbondsjisj2.5%,jwilljyourjbondjselljatjpar,jatjajpremium,jorjatjajdiscount?jExplainjwhy.
ANS:jWhenjmarketjinterestjratesjrisejrelativejtojcouponjratesjonjexistingjbonds,jthejpricejofjthesejexistingj
bondsjdecreasejbelowjfacejvalue.jThisjmeansjthatjthisjbondjwilljbejsoldjatjajdiscount,jsincejthejmarketjpric
ejisjbelowjthejfacejvaluejofjthejbond.
2. Ifjyoujhavejajbondjwithjajfacejvaluejofj$1,000jandjajcouponjratejofj2.5%,jbutjthejmarketjinterestjrat
ejforjsuchjbondsjisj2.25%,jwilljyourjbondjselljatjpar,jatjajpremium,jorjatjajdiscount?jExplainjwhy.
ANS:jPremiumjbecausejthejcouponjratejisjlessjthanjthejmarketjrate.
3. Ifjajthree-
yearjbondjwithjaj$1,000jfacejvaluejhasjajcouponjratejofj3.5%,jandjthejcurrentjmarketjinterestjratejisj
2%,jwhatjisjthejmarketjpricejofjthejbond?
a. $956.75
b. $1,035.00
c. $1,043.30
d. $1,148.34
jANS:j c
3-3 jSectionjReview
1. Youjreadjinjthejfinancialjpressjthatjmarketjparticipantsjexpectjstockjpricesjtojincreasejdramaticallyjinjth
ejnearjfuture,jwhilejatjthejsamejtimejbusinessjconfidencejisjincreasing.jExplainjinjwordsjandjshowjgraphic
allyjwhatjwilljhappenjinjthejbondjmarketjifjthejfirstjchangejisjlargerjinjmagnitudejthanjthejsecond.
ANS:jStocksjandjbondsjarejconsideredjsubstitutes,jthejreturnjonjholdingjstocksjarejgoingjtojincrease,jyouj
dojnotjwantjtojholdjbonds.j Demandjforjbondsjwilljfall,jrelativejreturnjtojbondsjisjdeclining.
Businessjconfidencejisjincreasingjsojfirmsjarejgoingjtojfundjmorejprojects.j Theyjwilljneedjtojborrowjmorej
money,jorjselljmorejbondsjtojraisejthosejfunds.j Thejsupplyjofjbondsjisjincreasing.j Duejtojthejdecreasejinjd
emandjforjbondsjisjbiggerjthanjthejsecond,jwejcanjconcludejequilibriumjpricejwilljfalljandjequilibriumjquan
tityjwilljincrease.
2. Storiesjappearjinjthejfinancialjpressjreportingjtwojeconomicjdevelopments:jWealthjlevelsjinjthejUnit
edjStatesjarejincreasing,jwhilejatjthejsamejtimejthejrelativejriskinessjofjbondsjissuedjbyjAmericanjcorpor
ationsjisjdecreasing.jExplainjinjwordsjwhatjwilljhappenjinjthejUSjbondjmarketjbecausejofjthesejtwojeven
ts.
ANS:jIncreasingjwealthjlevelsjcausejanjincreasejinjthejdemandjforjbondsjbecausejhouseholdsjcanjusejthisj
wealthjnotjonlyjtojincreasejconsumptionjbutjalsojsave.jSomejportionjofjthesejnewjsavingsjwilljfind
itsjwayjintojthejbondjmarketjasjhouseholdsjwilljpurchasejmorejbondsjatjeveryjprice.jAtjthejsamejtime,
ifjdefaultjriskjdecreases,jsaversjwilljbuyjmorejbondsjasjtheyjarejconsideredjajrelativelyjsaferjasset.jSo,
