貨幣銀行 Chapter 4 英文原版教材課件

1、Chapter 4Interest Rate Measurement and BehaviorLearning ObjectivesDescribe present value and the mechanics of calculating interest ratesComprehend the different types of bonds and loans and how their structure influences their present valueUnderstand interest rate determination and the supply and de

2、mand causes of interest rate fluctuations2IntroductionINTEREST RATES SERVE AS A YARDSTICK FOR COMPARING DIFFERENT TYPES OF SECURITIES AND MATURITIESCannot compare amount of total earning between different securitiesMust consider the amount of funds in the initial investment to compute the rate of re

3、turn (interest) on the different securities3Calculating Interest RatesSimple InterestInterest earned on the principle in one years time.Time is worth moneyA dollar today is worth more than a dollar in the futureA dollar due in the future is worth less than a dollar todayInterest earned = principal r

4、ate time (in years)4Calculating Interest Rates (Cont.)Compound InterestInterest that accumulates during a year is added to the principal at years end, thereby earning more interest in the following yearBanks automatically add interest earned to the principle at specified time intervalsFuture Value F

5、Vamount todays principle will be worth in “n years after adding compounded interest of rate “r.FV = principle(PV) (1 + r)n5Calculating Interest Rates (Cont.)Compound Interest (Cont.)Present Value PVamount a future sum of money in “n years will be worth today after discounting back to the present at

6、rate “r Future value/(1 + r)n = present value 6Calculating Interest Rates (Cont.)Coupon Rate on BondsAmount printed on the face of the bondAnnual (semiannual) interest payment (coupon payment) Return based on face value of the bond, not amount paid for the bondCurrent YieldYield on annual interest r

7、eceived based on purchase price of bondIgnores capital gaindifference between purchase price and amount when redeemed at maturity (face value)7Calculating Interest Rates (Cont.)Yield to MaturityMost accurate and widely used measure of interest ratesAssume the bond is held to maturityIncludes capital

8、 gains between purchase and sales prices of the bondInterest rate (rate of discount) which makes sum of present values of all expected future payments (annual interest plus face value) equal to purchase price8Calculating Interest Rates (Cont.)Yield to Maturity (Cont.)Where:P = Purchase price of bond

9、C = Annual coupon paymentFn = Face value at maturityr = rate of discount 9Calculating Interest Rates (Cont.)Zero-Coupon BondsBond holder received no coupon interest payments, only the face value of the bond when it maturesRate of discount (return on the bond) equates discounted face value (nnumber o

10、f years to maturity) with purchase price10Calculating Interest Rates (Cont.)Inverse Relationship Between Yields and Bond PricesHigher interest rates mean lower bond prices and vice versaIf either the interest rate or price is known, the other can be computedIf either the rate of interest or purchase

11、 price changes, the other will automatically change in the opposite direction11Calculating Interest Rates (Cont.)Why Long-Term Bonds are Riskier than Short-TermFor long-term securities, a small change in interest rates involves a large change in priceFor short-term securities, even a big change in y

12、ield involves only a small change in priceLonger a bonds maturity, the more its price will be affected by a change in the general level of interest rates12Calculating Interest Rates (Cont.)Why Long-Term Bonds are Riskier than Short-Term (Cont.)Long-term bonds are riskier because threat of potential

13、loss is greater provided the bonds must be sold prior to maturityGreater likelihood with long-term bonds of needing to sell before maturityOwners who can hold bonds until maturity will have temporary paper losses but eventually receive face value upon redemption at maturity13Real interest rate = Nom

14、inal rate Inflation rateCalculating Interest Rates (Cont.)Nominal Versus Real Interest RatesNominal Interest RatesMoney amount of interest receivedReal Interest RatesPurchasing power of interest receivedReal interest rate is the nominal interest adjusted for inflationWhere:“ex-anti is based on the e

15、xpected rate of inflation“ex-post is based on the actual or realized rate of inflation14Calculating Interest Rates (Cont.)Return Versus Yield to MaturityRate of return measures the cash flows received during a period relative to the amount invested at the beginningFor a bond held for one year, the r

16、eturn is computed as follows:15What Determines the Level of Interest Rates Supply/Demand Determine Interest Rate (Figure 4.1)Interest rate is price of credit or borrowing moneyMarket for Credit or Loanable Funds (Interest rate vs. Quantity of funds)Supply of FundsUpward sloping, lenders are willing

17、to extend more credit at higher interest ratesDemand for FundsDownward sloping, borrowers are willing to borrow less at higher interest ratesEquilibriumIntersection of supply and demand, no tendency to changeFinancial MarketsCompetitive so supply and demand pressures will result in interest rate cha

18、nges16FIGURE 4.1 Supply and demand determine the interest rate.17What Determines the Level of Interest Rates (Cont.)Why Does the Interest Rate FluctuateU.S. Treasury bond yields change day to day (Figure 4.2)Movement along a single curveChanges in the interest rate results in a movement along a sing

19、le demand or supply curve (Figure 4.3)Shifts of a CurveChange in determinants of supply or demand (other than interest rate) causes the respective curve to shift (Figure 4.4)Changes in EquilibriumShift of either the supply or demand curve will reflect a change in the equilibrium interest rate18FIGUR

20、E 4.2 U.S. Treasury bond yields fluctuate from day to day (2007).19FIGURE 4.3 Movement along a demand curve versus a shift in demand.20FIGURE 4.4 Shifts in demand (1) or supply (2) curves can change the equilibrium interest rate.21What Determines the Level of Interest Rates (Cont.)Behind Supply and

21、DemandBorrowing (demand)Business firmsfinance inventory or buy capital equipmentHouseholdsbuy cars, consumer goods, or homesState and local governmentprovide infrastructure or public servicesFederal governmentfinance Federal Budget DeficitINCREASES IN BORROWINGSHIFT DEMAND TO RIGHT AND RAISE INTERES

22、T22What Determines the Level of Interest Rates (Cont.)Behind Supply and Demand (Cont.)Lending or Credit (supply)Financial institutions or individuals lend to marketGovernment authorities may restrict lending by banksAbility of individuals to lend depends on their savingsless savings results in lower

23、 amount of lendingDECREASES IN LENDINGSHIFT SUPPLY TO LEFT AND RAISE INTEREST23What Determines the Level of Interest Rates (Cont.)The Importance of Inflationary ExpectationsEffect of a change in expectations of increasing inflationDemandBorrowers increase demand since they will be repaying in deprec

24、iated dollars and desire to purchase before the prices increaseSupplyLenders decrease supply since they will be repaid with money of diminished purchasing powerSHIFTS OF THE DEMAND AND SUPPLY CURVE WILL CAUSE THE INTEREST RATE TO INCREASE24What Determines the Level of Interest Rates (Cont.)The Impor

25、tance of Inflationary Expectations (Cont.)Self-fulfilling ProphesiesIf individuals and institutions expect inflation and interest rates to increase, they will alter behavior that causes the higher rates that were anticipated25What Determines the Level of Interest Rates (Cont.)Cyclical and Long-term