Ch06

Chapter 4 Measuring and Calculating Interest Rates and Financial Asset Prices

 Learning Objectives  ,[object Object],[object Object],[object Object]

Introduction ,[object Object],[object Object]

Units of Measurement For Interest Rates and Asset Prices ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Units of Measurement For Interest Rates and Asset Prices ,[object Object],[object Object],[object Object]

Measures of the Rate of Return (Yield) On a Financial Asset ,[object Object],[object Object],[object Object]

Measures of the Rate of Return (Yield) On a Financial Asset ,[object Object],[object Object]

Measures of the Rate of Return (Yield) On a Financial Asset ,[object Object],[object Object],Yield to maturity  12.8%

Measures of the Rate of Return (Yield) On a Financial Asset ,[object Object],[object Object],Holding period yield  16.5%

Measures of the Rate of Return (Yield) On a Financial Asset ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Yield-Asset Price Relationships ,[object Object],[object Object]

Yield-Asset Price Relationships ,[object Object],Interest Rate Loanable Funds r E Q E  Demand (borrowing) Supply (lending) Price Assets P E A E  Demand (lending) Supply (borrowing) Interest-Rate Determination Asset Price Determination

Yield-Asset Price Relationships ,[object Object],  supply of securities Interest Rate Loanable Funds  D S Interest-Rate Determination D’  Price Assets  Asset Price Determination D S S’ 

Yield-Asset Price Relationships ,[object Object],  demand for securities Interest Rate Loanable Funds  D S Interest-Rate Determination Price Assets  Asset Price Determination D S S’  D’ 

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],[object Object],[object Object]

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],[object Object]

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],[object Object],[object Object],[object Object]

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],[object Object],where L = total amount owed r = annual loan interest rate t = number of years of the loan

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],[object Object],FV = future value of the asset P = principal value of the asset r = annual interest rate m = annual compounding frequency t = term of the asset in years

Interest Rates Charged or Paid by Institutional Lenders ,[object Object],where i = interest earned b = daily average balance d = term in days

Markets on the Net ,[object Object],[object Object],[object Object],[object Object]

Markets on the Net ,[object Object],[object Object],[object Object]

Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object]

Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Chapter Review ,[object Object],[object Object],[object Object]

Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Ch06

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Ch06