货币金融学7版本英文课程--4-大学课程20.ppt

Chapter 4 Understanding Interest Rates Present Value Yield to Maturity: Loans Yield to Maturity: Bonds Relationship Between Price and Yield to Maturity Current Yield Bond Page of the Newspaper:Canada Bonds Bond Page of the Newspaper:Provincial and Municipal Bonds Bond Page of the Newspaper:Corporate Bonds Distinction Between Interest Rates and Returns Rate of Return C + Pt+1 – Pt RET = = ic + g Pt Key Facts about RelationshipBetween Interest Rates and Returns Maturity and the Volatility of Bond Returns Key Findings from Table 2 1. Only bond whose return = yield is one with maturity = holding period 2. For bonds with maturity holding period, i ? P? implying capital loss 3. Longer is maturity, greater is % price change associated with interest rate change 4. Longer is maturity, more return changes with change in interest rate 5. Bond with high initial interest rate can still have negative return if i ? Conclusion from Table 2 Analysis 1. Prices and returns more volatile for long-term bonds because have higher interest-rate risk 2. No interest-rate risk for any bond whose maturity equals holding period Distinction Between Real and Nominal Interest Rates Real Interest Rate Interest rate that is adjusted for expected changes in the price level ir = i – ?e 1. Real interest rate more accurately reflects true cost of borrowing 2. When real rate is low, greater incentives to borrow and less to lend if i = 5% and ?e = 3% then: ir = 5% – 3% = 2% if i = 8% and ?e = 10% then ir = 8% – 10% = –2% U.S. Real and Nominal Interest Rates ? 2005 Pearson Education Canada Inc. *? 2005 Pearson Education Canada Inc. Four Types of Credit Instruments 1. Simple loan 2. Fixed-payment loan 3. Coupon bond 4. Discount (zero coupon) bond Concept of Present Value Simple loan of $1 at 10% interest Year 1 2 3 n $1.10 $1.21 $1.33 $1x(1 + i)n $1 PV of future $1 = (1 + i)n Yield to maturity = interest rate that equates today’s value with present value of all future pay