金融学(英)课后习题答案

CHAPTER3

WhatisMoney?

1.

3.

(b)

Cavemendidnotneedmoney.Intheirprimitiveeconomy,theydidnotspecializein

producingonetypeofgoodandtheyhadlittleneedtotradewithothercavemen.

5.

Wineismoredifficulttotransportthangoldandisalsomoreperishable.Goldisthusabetter

storeofvaluethanwineandalsoleadstolowertransactionscost.Itisthereforeabetter

candidateforuseasmoney.

7.

Notnecessarily.Checkshavetheadvantageinthattheyprovideyouwith

receipts,areeasiertokeeptrackof,andmaymakeitharderforsomeoneto

stealmoneyoutofyouraccount.Theseadvantagesofchecksmayexplain

whythemovementtowardachecklesssocietyhasbeenverygradual.

8.

Therankingfrommostliquidtoleastliquidis:(a),(c),(e),(f),(b),and(d).

10.

BecauseoftherapidinflationinBrazil,thedomesticcurrency,thereal,isa

poorstoreofvalue.Thusmanypeoplewouldratherholddollars,whicharea

betterstoreofvalue,andusethemintheirdailyshopping.

14.

(a)M1,M2,andM3,(b)M2andM3forretailMMFsandM3forinstitutionalMMFs,(c)M3,

(d)M2andM3,(e)M3,(f)M1,M2,andM3.

CHAPTER4

UnderstandingInterestRates

2.

4.

No,becausethepresentdiscountedvalueofthesepaymentsisnecessarilyless

than$20millionaslongastheinterestrateisgreaterthanzero.

Theyieldtomaturityislessthan10percent.Onlyiftheinterestratewasless

than10percentwouldthepresentvalueofthepaymentsaddupto$4,000,

whichismorethanthe$3,000presentvalueinthepreviousproblem.

6.

8.

25%($1,000–$800)/$800$200/$800.25.

Iftheinterestratewere12percent,thepresentdiscountedvalueofthepaymentsonthe

governmentloanarenecessarilylessthanthe$1,000loanamountbecausetheydonotstartfor

twoyears.Thustheyieldtomaturitymustbelowerthan12percentinorderforthepresent

discountedvalueofthesepaymentstoaddupto$1,000.

10.

Thecurrentyieldwillbeagoodapproximationtotheyieldtomaturitywheneverthebond

priceisveryclosetoparorwhenthematurityofthebondisovertenyears.

12.

Youwouldratherbeholdinglong-termbondsbecausetheirpricewould

increasemorethanthepriceoftheshort-termbonds,givingthemahigher

return.

14.

Peoplearemorelikelytobuyhousesbecausetherealinterestratewhen

purchasingahousehasfallenfrom3percent(5percent2percent)to1

percent(10percent9percent).Therealcostoffinancingthehouseisthus

lower,eventhoughmortgagerateshaverisen.(Ifthetaxdeductibilityof

interestpaymentsisallowedfor,thenitbecomesevenmorelikelythatpeople

willbuyhouses.)

CHAPTER5

TheBehaviorofInterestRates

1.

3.

(a)Less,becauseyourwealthhasdeclined;(b)more,becauseitsrelativeexpectedreturnhas

risen;(c)less,becauseithasbecomelessliquidrelativetobonds;(d)less,becauseits

expectedreturnhasfallenrelativetogold;(e)more,becauseithasbecomelessriskyrelative

tobonds.

(a)More,becauseithasbecomemoreliquid;(b)less,becauseithasbecomemorerisky;(c)

more,becauseitsexpectedreturnhasrisen;(d)more,becauseitsexpectedreturnhasrisen

relativetotheexpectedreturnonlong-termbonds,whichhasdeclined.

5.

Theriseinthevalueofstockswouldincreasepeople’swealthandthereforethedemandfor

Rembrandtswouldrise.

7.

Intheloanablefundsframework,whentheeconomybooms,thedemandfor

bondsincreases:thepublic’sincomeandwealthriseswhilethesupplyof

bondsalsoincreases,becausefirmshavemoreattractiveinvestment

opportunities.Boththesupplyanddemandcurves(BdandBs)shifttotheright,

butasisindicatedinthetext,thedemandcurveprobablyshiftslessthanthe

supplycurvesotheequilibriuminterestraterises.Similarly,whenthe

economyentersarecession,boththesupplyanddemandcurvesshifttothe

left,butthedemandcurveshiftslessthanthesupplycurvesothattheinterest

ratefalls.Theconclusionisthatinterestratesriseduringboomsandfall

duringrecessions:thatis,interestratesareprocyclical.Thesameansweris

foundwiththeliquiditypreferenceframework.Whentheeconomybooms,the

demandformoneyincreases:peopleneedmoremoneytocarryoutan

increasedamountoftransactionsandalsobecausetheirwealthhasrisen.The

demandcurve,Md,thusshiftstotheright,raisingtheequilibriuminterestrate.

Whentheeconomyentersarecession,thedemandformoneyfallsandthe

demandcurveshiftstotheleft,loweringtheequilibriuminterestrate.Again,

interestratesareseentobeprocyclical.

10.

12.

Interestratesfall.Theincreasedvolatilityofgoldpricesmakesbondsrelativelylessrisky

relativetogoldandcausesthedemandforbondstoincrease.Thedemandcurve,Bd,shiftsto

therightandtheequilibriuminterestratefalls.

Interestratesmightrise.ThelargefederaldeficitsrequiretheTreasurytoissuemorebonds;

thusthesupplyofbondsincreases.Thesupplycurve,Bs,shiftstotherightandthe

equilibriuminterestraterises.SomeeconomistsbelievethatwhentheTreasuryissuesmore

bonds,thedemandforbondsincreasesbecausetheissueofbondsincreasesthepublic’s

wealth.Inthiscase,thedemandcurve,Bd,alsoshiftstotheright,anditisnolongerclearthat

theequilibriuminterestratewillrise.Thusthereissomeambiguityintheanswertothis

question.

14.

Thepriceleveleffecthasitsmaximumimpactbytheendofthefirstyear,andsincetheprice

leveldoesnotfallfurther,interestrateswillnotfallfurtherasaresultofapriceleveleffect.

Ontheotherhand,expectedinflationreturnstozerointhesecondyear,sothattheexpected

inflationeffectreturnstozero.Onefactorproducinglowerinterestratesthusdisappears,so,in

thesecondyear,interestratesmayrisesomewhatfromtheirlowpointattheendofthesecond

year.

16.

Ifthepublicbelievesthepresident’sprogramwillbesuccessful,interestrates

willfall.Thepresident’sannouncementwilllowerexpectedinflationsothat

theexpectedreturnongoodsdecreasesrelativetobonds.Thedemandfor

bondsincreasesandthedemandcurve,Bd,shiftstotheright.Foragiven

nominalinterestrate,thelowerexpectedinflationmeansthattherealinterest

ratehasrisen,raisingthecostofborrowingsothatthesupplyofbondsfalls.

Theresultingleftwardshiftofthesupplycurve,Bs,andtherightwardshiftof

thedemandcurve,Bd,causestheequilibriuminterestratetofall.

18.

20.

Interestrateswillrise.Theexpectedincreaseinstockpricesraisestheexpectedreturnon

stocksrelativetobondsandsothedemandforbondsfalls.Thedemandcurve,Bd,shiftstothe

leftandtheequilibriuminterestraterises.

Theslowerrateofmoneygrowthwillleadtoaliquidityeffect,whichraisesinterestrates,

whilethelowerpricelevel,income,andinflationratesinthefuturewilltendtolowerinterest

rates.Therearethreepossiblescenariosforwhatwillhappen:(a)iftheliquidityeffectis

largerthantheothereffects,theninterestrateswillrise;(b)iftheliquidityeffectissmaller

thantheothereffectsandexpectedinflationadjustsslowly,theninterestrateswillriseatfirst

butwilleventuallyfallbelowtheirinitiallevel;and(c)iftheliquidityeffectissmallerthan

theexpectedinflationeffectandthereisrapidadjustmentofexpectedinflation,theninterest

rateswillimmediatelyfall.

CHAPTER6

TheRiskandTermStructureofInterestRates

1.

3.

ThebondwithaCratingshouldhaveahigherinterestratebecauseithasahigherdefaultrisk,

whichreducesitsdemandandraisesitsinterestraterelativetothatontheBaabond.

Duringbusinesscyclebooms,fewercorporationsgobankruptandthereislessdefaultriskon

corporatebonds,whichlowerstheirriskpremium.Similarly,duringrecessions,defaultrisk

oncorporatebondsincreasesandtheirriskpremiumincreases.Theriskpremiumoncorporate

bondsisthusanticyclical,risingduringrecessionsandfallingduringbooms.

5.

Ifyieldcurvesonaveragewereflat,thiswouldsuggestthattheriskpremiumonlong-term

relativetoshort-termbondswouldequalzeroandwewouldbemorewillingtoacceptthe

expectationshypothesis.

7.

(a)Theyieldtomaturitywouldbe5percentforaone-yearbond,5.5percent

foratwo-yearbond,6percentforathree-yearbond,6percentforafour-year

bond,and5.8percentforafive-yearbond;(b)theyieldtomaturitywouldbe

5percentforaone-yearbond,4.5percentforatwo-yearbond,4percentfora

three-yearbond,4percentforafour-yearbond,and4.2percentforafive-year

bond.Theupward-andthendownward-slopingyieldcurvein(a)wouldtend

tobeevenmoreupwardslopingifpeoplepreferredshort-termbondsover

long-termbondsbecauselong-termbondswouldthenhaveapositiverisk

premium.Thedownward-andthenupward-slopingyieldcurvein(b)also

wouldtendtobemoreupwardslopingbecauseofthepositiveriskpremium

forlong-termbonds.

9.

Thesteepupward-slopingyieldcurveatshortermaturitiessuggeststhatshort-terminterest

ratesareexpectedtorisemoderatelyinthenearfuturebecausetheinitial,steepupwardslope

indicatesthattheaverageofexpectedshort-terminterestratesinthenearfutureareabovethe

currentshort-terminterestrate.Thedownwardslopeforlongermaturitiesindicatesthat

short-terminterestratesareeventuallyexpectedtofallsharply.Withapositiveriskpremium

onlong-termbonds,asinthepreferredhabitattheory,adownwardslopeoftheyieldcurve

occursonlyiftheaverageofexpectedshort-terminterestratesisdeclining,whichoccursonly

ifshort-terminterestratesfarintothefuturearefalling.Sinceinterestratesandexpected

inflationmovetogether,theyieldcurvesuggeststhatthemarketexpectsinflationtorise

moderatelyinthenearfuturebutfalllateron.

11.

13.

Thegovernmentguaranteewillreducethedefaultriskoncorporatebonds,

makingthemmoredesirablerelativetoTreasurysecurities.Theincreased

demandforcorporatebondsanddecreaseddemandforTreasurysecuritieswill

lowerinterestratesoncorporatebondsandraisethemonTreasurybonds.

Abolishingthetax-exemptfeatureofmunicipalbondswouldmakethemless

desirablerelativetoTreasurybonds.Theresultingdeclineinthedemandfor

municipalbondsandincreaseindemandforTreasurybondswouldraisethe

interestratesonmunicipalbonds,whiletheinterestratesonTreasurybonds

wouldfall.

15.

Theslopeoftheyieldcurvewouldfallbecausethedropinexpectedfutureshortratesmeans

thattheaverageofexpectedfutureshortratesfallssothatthelongratefalls.

CHAPTER7

TheStockMarket,theTheoryofRationalExpectations,andtheEfficient

MarketHypothesis

1.

Thevalueofanyinvestmentisfoundbycomputingthevaluetodayofallcash

flowstheinvestmentwillgenerateoveritslife.

3.

5.

$1/(1.15)$20/(1.15)$18.26

Astockmarketbubblecanoccurifmarketparticipantseitherbelievethatdividendswillhave

rapidgrowthoriftheysubstantiallylowertherequiredreturnontheirequityinvestments,thus

loweringthedenominatorintheGordonmodelandtherebycausingstockpricestoclimb.By

raisinginterestratesthecentralbankcancausetherequiredrateofreturnonequitytorise,

therebykeepingstockpricesfromclimbingasmuch.Alsoraisinginterestratesmayhelpslow

theexpectedgrowthrateoftheeconomyandhenceofdividends,thusalsokeepingstock

pricesfromclimbing.

7.

AlthoughJoe’sexpectationsaretypicallyquiteaccurate,theycouldstillbe

improvedbyhistakingaccountofasnowfallinhisforecasts.Sincehis

expectationscouldbeimproved,theyarenotoptimalandhencearenot

rationalexpectations.

9.

True,asanapproximation.Iflargechangesinastockpricecouldbepredicted,thenthe

optimalforecastofthestockreturnwouldnotequaltheequilibriumreturnforthatstock.In

thiscase,therewouldbeunexploitedprofitopportunitiesinthemarketandexpectations

wouldnotberational.Verysmallchangesinstockpricescouldbepredictable,however,and

theoptimalforecastofreturnswouldequaltheequilibriumreturn.Inthiscase,anunexploited

profitopportunitywouldnotexist.

11.

13.

Thestockpricewillrise.Eventhoughthecompanyissufferingaloss,thepriceofthestock

reflectsanevenlargerexpectedloss.Whenthelossislessthanexpected,efficientmarkets

theorythenindicatesthatthestockpricewillrise.

Probablynot.Althoughyourbrokerhasdonewellinthepast,efficientmarketstheory

suggeststhatshehasprobablybeenlucky.Unlessyoubelievethatyourbrokerhasbetter

informationthantherestofthemarket,efficientmarketstheoryindicatesthatyoucannot

expectthebrokertobeatthemarketinthefuture.

15.

False.Allthatisrequiredforthemarkettobeefficientsothatpricesreflectinformationonthe

monetaryaggregatesisthatsomemarketparticipantseliminateunexploitedprofit

opportunities.Noteveryoneinamarkethastobeknowledgeableforthemarkettobe

efficient.

17.

Becauseinflationislessthanexpected,expectationsoffutureshort-terminterestrateswould

belowered,andaswelearnedinChapter7,long-terminterestrateswouldfall.Thedeclinein

long-terminterestratesimpliesthatlong-termbondpriceswouldrise.

19.

No,becausethisexpectedchangeinthevalueofthedollarwouldimplythat

thereisahugeunexploitedprofitopportunity(overa100%expectedreturnat

anannualrate).Sincerationalexpectationsrulesoutunexploitedprofit

opportunities,suchabigexpectedchangeintheexchangeratecouldnotexist.

CHAPTER8

AnEconomicAnalysisofFinancialStructure

1.

Financialintermediariescantakeadvantageofeconomiesofscaleandthuslowertransactions

costs.Forexample,mutualfundstakeadvantageoflowercommissionsbecausethescaleof

theirpurchasesishigherthanforanindividual,whilebanks’largescaleallowsthemtokeep

legalandcomputingcostspertransactionlow.Economiesofscalewhichhelpfinancial

intermediarieslowertransactionscostsexplainswhyfinancialintermediariesexistandareso

importanttotheeconomy.

3.

5.

7.

No.Ifthelenderknowsasmuchabouttheborrowerastheborrowerdoes,

thenthelenderisabletoscreenoutthegoodfromthebadcreditrisksandso

adverseselectionwillnotbeaproblem.Similarly,ifthelenderknowswhat

theborrowerisupto,thenmoralhazardwillnotbeaproblembecausethe

lendercaneasilystoptheborrowerfromengaginginmoralhazard.

ThelemonsproblemwouldbelesssevereforfirmslistedontheNewYork

StockExchangebecausetheyaretypicallylargercorporationsthatarebetter

knowninthemarketplace.Thereforeitiseasierforinvestorstoget

informationaboutthemandfigureoutwhetherthefirmisofgoodqualityoris

alemon.Thismakestheadverseselection–lemonsproblemlesssevere.

Becausethereisasymmetricinformationandthefree-riderproblem,notenoughinformation

isavailableinfinancialmarkets.Thusthereisarationaleforthegovernmenttoencourage

informationproductionthroughregulationsothatitiseasiertoscreenoutgoodfrombad

borrowers,therebyreducingtheadverseselectionproblem.Thegovernmentcanalsohelp

reducemoralhazardandimprovetheperformanceoffinancialmarketsbyenforcingstandard

accountingprinciplesandprosecutingfraud.

9.

Yes,thisisanexampleofanadverseselectionproblem.Becauseapersonisrich,thepeople

whoaremostlikelytowanttomarryhimorheraregolddiggers.Richpeoplethusmaywant

tobeextracarefultoscreenoutthosewhoarejustinterestedintheirmoneyfromthosewho

wanttomarryforlove.

11.

Thefree-riderproblemmeansthatprivateproducersofinformationwillnotobtainthefull

benefitoftheirinformation-producingactivities,andsolessinformationwillbeproduced.

Thismeansthattherewillbelessinformationcollectedtoscreenoutgoodfrombadrisks,

makingadverseselectionproblemsworse,andthattherewillbelessmonitoringofborrowers,

increasingthemoralhazardproblem.

13.

15.

Afinancialcrisisismorelikelytooccurwhentheeconomyisexperiencingdeflationbecause

firmsfindthattheirrealburdenofindebtednessisincreasingwhilethereisnoincreaseinthe

realvalueoftheirassets.Theresultingdeclineinafirm’snetworthincreasesadverse

selectionandmoralhazardproblemsfacinglenders,makingitmorelikelyafinancialcrisis

willoccurinwhichfinancialmarketsdonotworkefficientlytogetfundstofirmswith

productiveinvestmentopportunities.

Asharpincreaseininterestratescanincreasetheadverseselectionproblemdramatically

becauseindividualsandfirmswiththeriskiestinvestmentprojectsaretheoneswhoaremost

willingtopayhigherinterestrates.Asharpriseininterestrateswhichincreasesadverse

selectionmeansthatlenderswillbemorereluctanttolend,leadingtoafinancialcrisisin

whichfinancialmarketsdonotworkwellandthustoadecliningeconomy.

CHAPTER9

BankingandtheManagementofFinancialInstitutions

1.

3.

BecauseifthebankborrowstoofrequentlyfromtheFed,theFedmayrestrictitsabilityto

borrowinthefuture.

TheT-accountsforthetwobanksareasfollows:

FirstNationalBank

Liabilities

SecondNationalBank

AssetsLiabilities

Assets

Reserves

Checkable

Reserves

Checkable

–$50

–$50

$50

$50

Deposits

Deposits

5.

The$50milliondepositoutflowmeansthatreservesfallby$50millionto$25million.Since

requiredreservesare$45million(10percentofthe$450millionofdeposits),yourbank

needstoacquire$20millionofreserves.Youcouldobtainthesereservesbyeithercallingin

orsellingoff$20millionofloans,byborrowing$20millionindiscountloansfromtheFed,

byborrowing$20millionfrom