Assume that you are one of six thousand people who live on the small island of tap. this island is small and can only produce a maximum of six thousand bags of corn a year (ignore technological advances in corn production that are occurring elsewhere in the world). the six thousand bags of corn produced are just enough for the residents since each resident only earns enough to buy one bag of corn a year (a pity since the tapese really love the currency on tap is the us dollar. now suppose that the government of tap injects more us dollars into the economy, and the result is that person now ends up having twice the amount of us dollars as he or she did before. make a logical prediction about prices of corn in the economy, and explain what principle of economics is illustrated in this scenario.

develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. organize your response in a clear and logical manner as appropriate for the genre of writing. use well-structured sentences, audience-appropriate language, and correct conventions of standard american english.

Risk is the risk of a decline in a bond's value due to an increase in interest rates. this risk is higher on bonds that have long maturities than on bonds that will mature in the near future. risk is the risk that a decline in interest rates will lead to a decline in income from a bond portfolio. this risk is obviously high on callable bonds. it is also high on short-term bonds because the shorter the bond's maturity, the fewer the years before the relatively high old-coupon bonds will be replaced with new low-coupon issues. which type of risk is more relevant to an investor depends on the investor's , which is the period of time an investor plans to hold a particular investment. longer maturity bonds have high risk but low risk, while higher coupon bonds have a higher level of risk and a lower level of risk. to account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called , which is the weighted average of the time it takes to receive each of the bond's cash flows. conceptual question: which of the following bonds would have the largest duration? a)10year-zero coupon bonds b)10year-7% annual coupon bonds c)10year-3% annual coupon bonds d)5year-3% annual coupon bonds e)3year-7% annual coupon bonds