Final answer:
By comparing the required returns with the bond's yield, we can determine that Janey would buy the bond because her required return is lower than the market rate, Jonny would sell because his required return is higher, and Jimmy would be indifferent as his required return matches the market rate.
Step-by-step explanation:
To understand which of the savers would buy or sell the bond, we need to compare their individual required returns with the bond's yield. Since all savers own a US Gov't bond with a coupon of $100, which, if selling for par value, implies that the bond is sold for its face value of $1,000. This suggests the bond has a coupon rate of 10%. Janey's required return to hold the bond is 8%, Jimmy's is 10%, and Jonny's is 11%. We can infer the bond's current market interest rate must be 10% because it's selling at par value and matches Jimmy's required return.
Given this information, Janey's required return is lower than the market interest rate, which means she would perceive the bond as a good investment and would likely buy it. Meanwhile, since Jimmy's required return matches the market interest rate, he would be indifferent to buying or selling the bond. Jonny's required return is higher than the market interest rate, which implies that he would not perceive the bond as a satisfying investment and would probably sell it. Therefore, the correct answer is that Janey buys the bond, Jonny sells the bond, and Jimmy is indifferent. The mathematical justification relies on comparing the bond's yield to the individual required rates of return to make buy or sell decisions.