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Predicted yield for a given holding period. Must forecast— Expected interest rate(s) Bond price at end of holding period Plug forecast results into bond pricing formula
34 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 830 | Lượt tải: 0
Unanticipated inflation benefits borrowers at expense of lenders. Lenders charge added interest to offset anticipated decreases in purchasing power. Expected inflation is embodied in nominal interest rates: The Fisher Effect.
13 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 946 | Lượt tải: 0
Much consumer spending is on credit, so it tends to vary directly with credit conditions Falling interest rates tend to encourage spending Rising interest rates tend to discourage spending Fed can encourage/discourage but not necessarily compel; Consumers don’t necessarily make financial decisions the way businesses do - Businesses are mostly ...
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John Maynard Keynes was influential British economist of 1930s Keynesians discount or disregard direct money supply effects Real sector economic growth is— Stimulated by falling rates as economic activity costs less to finance Slowed by rising rates as economic activity costs more to finance Always and significantly susceptible to influence of...
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Main operating assets— Loans at Discount Window US Government Securities “CIPC”—Cash Items in Process of Collection Main operating liabilities— Federal Reserve Notes in Circulation Depository Institution Reserves “DACI”—Deferred Availability Cash Items
33 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 941 | Lượt tải: 0
Rights in underlying securities or commodities—writer grants owner some exclusive right for some certain time Main types of options: Puts (options to sell) Calls (options to buy) Options on listed securities and widely held commodities trade actively on organized exchanges
56 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 940 | Lượt tải: 0
The Securities and Exchange Commission (SEC) (Cont.) – Despite the scrutiny of the SEC, investors, and traders—manipulation, fraud, misinformation, and deception still exist in the market – Caveat emptor et venditor—buyers/sellers beware—necessary precautions to ensure market efficiency
9 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 980 | Lượt tải: 0
As long as assets do not have precisely the same pattern of returns, then holding a group of assets can reduce risk • If the returns of each security are totally independent of each other, combining a large number of securities tends to produce the average return of the portfolio
6 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 817 | Lượt tải: 0
Issued by state and local governments • Lowest yield because interest earnings are exempt from federal tax • By law Congress does have the power to tax, but has decided not to tax this source of revenue
15 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 824 | Lượt tải: 0
What Determines Option Premiums? (Cont.) – Premiums on put options will be higher the lower the price of the underlying asset, greater volatility of asset and longer time to expiration – Options are an expensive way to hedge portfolio risks if those risks are substantial
12 trang | Chia sẻ: huyhoang44 | Ngày: 27/03/2020 | Lượt xem: 769 | Lượt tải: 0
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