金融附送多恩课件英文

1、18-118-2Chapter18Financial Markets and Asset PricesItem ItemItemEtc.McGraw-Hill/IrwinMacroeconomics, 10e 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.18-3IntroductionFinancial markets link the macroeconomy and government policy directly to the lives of everyday peopleChanges in interest

2、 rates affect our ability to finance a home, carMovements in the stock market determine the value of pensionsIn this chapter we examine the behavior of three financial markets: Bond marketStock marketForeign exchange market18-4Interest Rates: Long and Short TermInterest rates summarize the promised

3、repayment terms on bonds, loans not just one interest rate Interest rates differ according to:Credit worthiness of issuerTax treatmentsRisk TermOther factorsThe factor of greatest focus here is the term or the length of time the interest rate coversThe relation between interest rates of different ma

4、turities is called the term structure of interest18-5Interest Rates: Long and Short TermFigure 18-1 shows interest rates for U.S. Treasury securities from 3 months to 30 yearsInterest rates of different maturities mostly go up and down togetherThe gap between long term rates and short-term rates var

5、iesLong-term rates are usually higher than short-term ratesinsert Figure 18-1 here18-6Interest Rates: Long and Short TermConsider the relation between the 1-year and 3-year rates (today is January 1, 2020)You have the option of:Making a three year investment today and earning 3i2020 each year ORInve

6、sting for one year, reinvesting for another year at the prevailing rate at the beginning of 2021, and doing the same at the beginning of 2022Insert Figure 18-2 here18-7Interest Rates: Long and Short TermIf all of the rates in Figure 18-2 were known in advance, the total returns would be equal for bo

7、th optionsIf the total returns were not equal, everyone would invest in the alternative with the greatest return illustrates the idea of ARBITRAGE: Insert Figure 18-2 hereThe long-term interest rate equals the average of current and future short-term interest rates.18-8Interest Rates: Long and Short

8、 TermThe problem is, in 2020 we do not know 1i2021 or 1i2022 with certaintyNeed to modify our equation in two ways:Todays long-term rate depends on the current short-term rate and the expected future short-term ratesUncertainty implies risk, and long-term investments command a term premium, PR, to c

9、ompensate for this risk The term structure equation es: (1)18-9Interest Rates: Long and Short Term Table 18-1 shows the average term premiums based on the interest rates shown in Figure 18-1Equation (1) shows the expectations theory of the term structureTerm premiums vary over time, but are generall

10、y higher for longer-term ratesInsert Table 18-1 hereInsert Figure 18-1 here, again18-10The Yield CurveInterest rates for different maturities are illustrated by the yield curve Figure 18-3Typically upward sloping since long-term rates are generally higher than short-run ratesIf yield curve slopes do

11、wnward, indicates financial markets expect interest rates to fallOften a recessionary signalIndicates the market anticipates a coming drop in interest ratesInsert Figure 18-3 here18-11Bond Prices and YieldsBond prices are inversely related to interest ratesIf a bond is to pay $100 a year from now an

12、d has an interest rate i, then its price, P, must be such that:Ex. A $100 bond will have a 5% yield if its price is $95.24 Suppose after you buy a bond, i rises from 5% to 10%In order to sell the bond, must compensate the buyer for the lower earnings for this bond compared to a new bond at 10%The lo

13、nger the term of the bond, the greater the required change in the price to compensate for a change in the interest rateLong term bonds are subject to considerable price fluctuations.18-12The Random Walk of Stock PricesStock prices are essentially unpredictable, and are said to follow a random walk:

14、(2)The price tomorrow is equal to the price today plus a random error term/surprise change, Changes in stock prices are unpredictable“a” is small and accounts for the expected return to holding assetsFigure 18-4 plots an index of Canadian stock prices against their lagsInsert Figure 18-4 here18-13Th

15、e Random Walk of Stock Prices (2)A random walk is a sign of market efficiencyUsing two assumptions, can show a random walk is just what we should expect from a well-functioning market:The price of a stock is the net present value of expected dividendsNew information changes expectations of future di

16、vidends but only by surpriseInsert Figure 18-5 here18-14Exchange Rates and Interest RatesArbitrage arguments also link exchange rates to international interest rate differentialsSuppose an individual faces two investment options for an American with $100:Invest in the U.S.Convert $100 to Canadian do

17、llars, and invest in Canada for one year. At the end of the year, convert back to U.S. dollarsOption 1:Investor ends the year with dollars If the interest rate is the U.S. is 5%, the investor will end up with US$10518-15Exchange Rates and Interest RatesArbitrage arguments also link exchange rates to

18、 international interest rate differentialsSuppose an individual faces two investment options for an American with $100:Invest in the U.S.Convert $100 to Canadian dollars, and invest in Canada for one year. At the end of the year, convert back to U.S. dollarsOption 2:U.S. dollars are converted to Canadian dollarsSuppose exchange rate, et, is US$0.90 per CDN$1.00The conversion gives the investor 100/et Canadian $If the Canadian interest rate is i*, after a year the investor will have CDN$(100/et) x (1+i*)CDN$ are converted back to US$ at an exchange ra