财务管理-社团的财政讲义11英文版.pptVIP

Corp Financial Theory Corp Financial Theory Topics Covered: * Capital Budgeting (investing) * Financing (borrowing) Corp Financial Theory Topics Covered: * Capital Budgeting (investing) * Financing (borrowing) Today: Revisit Financing Debt Financing, Risk Interest Rates Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Nominal Interest Rate = The rate you actually pay when you borrow money Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Nominal Interest Rate = The rate you actually pay when you borrow money Real Interest Rate = The theoretical rate you pay when you borrow money, as determined by supply and demand Supply Demand $ Qty r Real r Debt Interest Rates Nominal r = Real r + expected inflation Real r is theoretically somewhat stable Inflation is a large variable Q: Why do we care? A: This theory allows us to understand the Term Structure of Interest Rates. Q: So What? A: The Term Structure tells us the cost of debt. Term Structure Spot Rate - The actual interest rate today (t=0) Forward Rate - The interest rate, fixed today, on a loan made in the future at a fixed time. Future Rate - The spot rate that is expected in the future Yield To Maturity (YTM) - The IRR on an interest bearing instrument YTM (r) Year 1981 1987 present 1976 1 5 10 20 30 Term Structure 1987 is the normal Term Structure 1981 is abnormal dangerous to the economy (becasue there is an incentive not to invest) YTM (r) Year 1981 1987 present 1976 1 5 10 20 30 Term Structure 1987 is the normal Term Structure 1981 is abnormal dangerous to the economy (becasue there is an incentive not to invest) YTM (r) Year 1981 1987 present 1976 1 5 10 20 30 E