资本市场和金融机构interestrates.pptxVIP

资本市场和金融机构InterestRates会计学第1页/共38页1. Interest Rate (i)i = Cost of borrowing or lending money It plays a pivotal role in:the Investment and Financing of assets (real, financial) by individuals, companies, governments and FIthe performance of the economyDetermined in the Debt Markets (supply and demand) and by government intervention.Central Bank ? Monetary policy (i, M)Is there an appropriate level of i?第2页/共38页Interest RateHow the interest rates are determined?What explains the fluctuation of interest rates?Most accurate measure of interest rate: Yield to maturity Example applied to bond valuation第3页/共38页Determination of Interest Rate (i) Approaches 1) Analysis of Demand of loanable funds and Supply of loanable funds 2) Analysis of Demand for and supply of bondsSupply of loanable funds by households and firms. The higher the i the higher the quantity of loanable funds offeredDemand of loanable funds by households and firms Reasons for Consumer? For Firms? Total Demand = Demand by households and firmsDeterminants of the Demand and Supply第4页/共38页Supply and Demand for Loanable Funds Interest Rate (i)Supplyi*DemandQuantity of loanable funds Q*第5页/共38页 What determines the supply of loanable funds? The supply of loanable funds is determined by the interest rate offered to savers. A higher interest rate induces households to consume less today (save) in favor of greater consumption in the future. Firm also may have excess of cash that may be loaned (e.g., purchase of other firm’s bond issue) instead of invested (real assets) because of the non availability of projects with +NPV.? What determines the demand for loanable funds? It comes from: consumers who wish to consume more today than tomorrow, individuals, financial and non-financial firms to invest in financial assets financial and non-financial firms to invest in real assets Demand depends on the interest rate at which these three groups can borrow. The lower the interest rate the higher the demand and vice-vers