Willingness to Pay, MB and Consumer Surplus
... On the previous screen someone is willing to pay $5 for the first unit. Note areas b, c, d, e and f add up to the $5. This is almost all the area under the demand curve out to one unit. If we add in area a we can say all the area under the demand curve out to a quantity is what the consumer is willi ...
... On the previous screen someone is willing to pay $5 for the first unit. Note areas b, c, d, e and f add up to the $5. This is almost all the area under the demand curve out to one unit. If we add in area a we can say all the area under the demand curve out to a quantity is what the consumer is willi ...
Lecture 1
... are represented by forward rates, or that forward rates are unbiased forecasts of future forward rates • The evaluation of expected coupons by forward rates is NOT linked to any future scenario of interest rates, but only to the current interest rate curve. • The forward term structure changes with ...
... are represented by forward rates, or that forward rates are unbiased forecasts of future forward rates • The evaluation of expected coupons by forward rates is NOT linked to any future scenario of interest rates, but only to the current interest rate curve. • The forward term structure changes with ...
Treasury Inflation Protected Securities (TIPS) in a Rising
... Investors are primarily concerned with nominal interest rate risk, credit risk, and inflation risk in their bond portfolios. Nominal interest rate risk can be controlled by selecting bonds with lower duration, and credit risk can be mitigated by selecting bonds issued by safer borrowers. However, co ...
... Investors are primarily concerned with nominal interest rate risk, credit risk, and inflation risk in their bond portfolios. Nominal interest rate risk can be controlled by selecting bonds with lower duration, and credit risk can be mitigated by selecting bonds issued by safer borrowers. However, co ...
Quiz #1 with Answers
... The range of trading prices for 20 basketballs will be between 25 dozen doughnuts and 80 dozen doughnuts. 3. For each of the following scenarios draw a graph to illustrate the initial situation and the situation after the scenario. Then provide a verbal explanation of what will happen to price and q ...
... The range of trading prices for 20 basketballs will be between 25 dozen doughnuts and 80 dozen doughnuts. 3. For each of the following scenarios draw a graph to illustrate the initial situation and the situation after the scenario. Then provide a verbal explanation of what will happen to price and q ...
Chapter 4
... We know that interest rates are negatively related to the price of bonds, so if we can explain why bond prices change, we can also explain why interest rates move. Copyright © 2009 Pearson Prentice Hall. All rights reserved. ...
... We know that interest rates are negatively related to the price of bonds, so if we can explain why bond prices change, we can also explain why interest rates move. Copyright © 2009 Pearson Prentice Hall. All rights reserved. ...
answer key - Iowa State University Department of Economics
... rates on bonds of different maturities tend to move together over time? A) The expectations theory B) The segmented markets theory C) The liquidity premium theory D) Both (a) and (b) of the above E) Both (a) and (c) of the above Answer: E 12) If the expected path of one-year interest rates over the ...
... rates on bonds of different maturities tend to move together over time? A) The expectations theory B) The segmented markets theory C) The liquidity premium theory D) Both (a) and (b) of the above E) Both (a) and (c) of the above Answer: E 12) If the expected path of one-year interest rates over the ...
WisdomTree Bloomberg U.S. Dollar Bullish Fund
... Index Description The Fund will seek exposure to both the U.S. dollar and global currencies held by the Index through investing, under normal circumstances, at least 80% of its assets in money market securities and other liquid securities, such as short-term investment grade government and corporate ...
... Index Description The Fund will seek exposure to both the U.S. dollar and global currencies held by the Index through investing, under normal circumstances, at least 80% of its assets in money market securities and other liquid securities, such as short-term investment grade government and corporate ...
Slide 1
... • Supply and Demand models show the behavior of a competitive market • The five elements of the model are: – The demand curve – The supply curve – The set of factors that cause the demand curve to shift and the set of factors that cause the supply curve to shift – The market equilibrium (includes t ...
... • Supply and Demand models show the behavior of a competitive market • The five elements of the model are: – The demand curve – The supply curve – The set of factors that cause the demand curve to shift and the set of factors that cause the supply curve to shift – The market equilibrium (includes t ...
Worth the risk? The appeal and challenges of high
... on the factors identified. Using alternative regression statistics, the adjusted R-square for the Barclays U.S. Corporate High Yield Bond Index versus the Fama-French factors was 0.432 and versus the constant-maturity Treasury bonds was 0.01. For the Barclays U.S. Aggregate Bond Index, the r-square ...
... on the factors identified. Using alternative regression statistics, the adjusted R-square for the Barclays U.S. Corporate High Yield Bond Index versus the Fama-French factors was 0.432 and versus the constant-maturity Treasury bonds was 0.01. For the Barclays U.S. Aggregate Bond Index, the r-square ...
Gundlach: Trump Should be Commended
... He doesn’t like investment-grade corporate bonds because they have too much interest-rate risk relative to their yield. Gundlach said the credit cycle is “okay for the near term,” since commodity prices bottomed at year end. He said he wouldn’t be surprised if the 10-year Treasury bond is at 6% in f ...
... He doesn’t like investment-grade corporate bonds because they have too much interest-rate risk relative to their yield. Gundlach said the credit cycle is “okay for the near term,” since commodity prices bottomed at year end. He said he wouldn’t be surprised if the 10-year Treasury bond is at 6% in f ...
1. Consumer Theory (Cont.) 1.5- Consumer Choice 1.6
... From that expression, one can see that the T ...
... From that expression, one can see that the T ...
Chapter 22
... The CPP was designed to help FIs increase their capital with the aim of increasing lending to the general public Lending fell in 2008, 2009, and 2010, so in this sense, the program was a failure, although presumably lending would have fallen even farther without it and more failures may have occur ...
... The CPP was designed to help FIs increase their capital with the aim of increasing lending to the general public Lending fell in 2008, 2009, and 2010, so in this sense, the program was a failure, although presumably lending would have fallen even farther without it and more failures may have occur ...
Multiple Choice Questions
... If the government cuts taxes today, issuing debt today and repaying the debt plus interest next year, a rational taxpayer will (a) spend the full amount of the tax cut today and reduce consumption next year. (b) increase consumption today, before taxes go up next year. (c) increase saving today, lea ...
... If the government cuts taxes today, issuing debt today and repaying the debt plus interest next year, a rational taxpayer will (a) spend the full amount of the tax cut today and reduce consumption next year. (b) increase consumption today, before taxes go up next year. (c) increase saving today, lea ...
Worth the risk? The appeal and challenges of high
... Notes: US stocks represented by the MSCI USA Index, US investment-grade bonds by the Barclays U.S. Aggregate Bond Index, and U.S. high-yield bonds by the Barclays U.S. Corporate High Yield Bond Index. Data are for the period 1 July 1983–30 June 2012. Sources: Vanguard calculations, using data from B ...
... Notes: US stocks represented by the MSCI USA Index, US investment-grade bonds by the Barclays U.S. Aggregate Bond Index, and U.S. high-yield bonds by the Barclays U.S. Corporate High Yield Bond Index. Data are for the period 1 July 1983–30 June 2012. Sources: Vanguard calculations, using data from B ...
Perfect Competition Principles of Microeconomics Boris Nikolaev
... Perfect Competition 1. Large number of relatively small buyers and sellers. No market power. 2. Homogeneous products. 3. Easy entry and exit. 4. Perfect information of price and availability. 5. No advertising (or other forms of competition). Implications: From 1. and 2. PC firms are PRICE TAKERS ...
... Perfect Competition 1. Large number of relatively small buyers and sellers. No market power. 2. Homogeneous products. 3. Easy entry and exit. 4. Perfect information of price and availability. 5. No advertising (or other forms of competition). Implications: From 1. and 2. PC firms are PRICE TAKERS ...
Three Essays on The Term Structure of Interest Rates
... exchange rate. Since the supply for foreign bonds is essentially fixed in the short-run by the cumulative current balance in the model, the domestic currency appreciates now, creating expected future depreciation of the currency in order to restore an equilibrium. Second, the risk premium for domes ...
... exchange rate. Since the supply for foreign bonds is essentially fixed in the short-run by the cumulative current balance in the model, the domestic currency appreciates now, creating expected future depreciation of the currency in order to restore an equilibrium. Second, the risk premium for domes ...
Yield curve
In finance, the yield curve is a curve showing several yields or interest rates across different contract lengths (2 month, 2 year, 20 year, etc...) for a similar debt contract. The curve shows the relation between the (level of) interest rate (or cost of borrowing) and the time to maturity, known as the ""term"", of the debt for a given borrower in a given currency. For example, the U.S. dollar interest rates paid on U.S. Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right which is informally called ""the yield curve"". More formal mathematical descriptions of this relation are often called the term structure of interest rates.The shape of the yield curve indicates the cumulative priorities of all lenders relative to a particular borrower, (such as the US Treasury or the Treasury of Japan) or the priorities of a single lender relative to all possible borrowers. With other factors held equal, lenders will prefer to have funds at their disposal, rather than at the disposal of a third party. The interest rate is the ""price"" paid to convince them to lend. As the term of the loan increases, lenders demand an increase in the interest received. In addition, lenders may be concerned about future circumstances, e.g. a potential default (or rising rates of inflation), so they offer higher interest rates on long-term loans than they offer on shorter-term loans to compensate for the increased risk. Occasionally, when lenders are seeking long-term debt contracts more aggressively than short-term debt contracts, the yield curve ""inverts"", with interest rates (yields) being lower for the longer periods of repayment so that lenders can attract long-term borrowing.The yield of a debt instrument is the overall rate of return available on the investment. In general the percentage per year that can be earned is dependent on the length of time that the money is invested. For example, a bank may offer a ""savings rate"" higher than the normal checking account rate if the customer is prepared to leave money untouched for five years. Investing for a period of time t gives a yield Y(t).This function Y is called the yield curve, and it is often, but not always, an increasing function of t. Yield curves are used by fixed income analysts, who analyze bonds and related securities, to understand conditions in financial markets and to seek trading opportunities. Economists use the curves to understand economic conditions.The yield curve function Y is actually only known with certainty for a few specific maturity dates, while the other maturities are calculated by interpolation (see Construction of the full yield curve from market data below).