国际金融ch03资料.ppt

3 Structure of Interest Rates Chapter Objectives Learn why individual interest rates differ or why security prices vary or change Analyze theories explaining why rates vary by term or maturity, called the term structure of interest rates Factors Affecting Security Yields Risk-averse investors Factors Affecting Security Yields Security yields and prices are affected by levels and changes in: Default risk (also called Credit Risk) Liquidity Tax status Term to maturity Special contract provisions such as embedded options Credit ( Default ) risk Definitions : Credit risk refers to the chance that the issuer of the debt security will default. Default-free bonds，which is also called risk-free bonds，refers to T-bonds which have no default risk. Risk premium refers to the spread between interest rates on bonds with defaut risk and default-free bonds.The higher the credit risk is，the larger the risk premium is. Response to an increase in default risk on Corporate bonds Response to an increase in default risk on Corporate bonds Factors Affecting Security Yields Rating agencies set default risk ratings. Factors Affecting Security Yields A liquid investment is easily converted to cash at minimum transactions cost. Investors pay more (lower yield) for liquid investment. Liquidity is associated with short-term, low default risk, marketable securities. The Liquidity of a security affects the yield/price of the security. Factors Affecting Security Yields Tax status of income or gain on security impacts the security yield. Investor concerned with after-tax return or yield. Investors require higher yields for higher taxed securities. Factors Affecting Security Yields Yat = Ybt(1 – T) Where: Yat = after-tax yield Ybt = before-tax yield T = investor’s marginal tax rate Factors Affecting Security Yields Example: a taxable security that offers a before-tax yield of 14 percent. The investor’s tax rate is 20 percent. Calculate the after-tax yi