金融市场Ch04

Chapter4WhyDoInterestRatesChange?Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-2ChapterPreviewIntheearly1950s,short-termTreasurybillswereyieldingabout1%.By1981,theyieldsroseto15%andhigher.Butthendroppedbackto1%by2003.Whatcausesthesechanges?Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-3ChapterPreviewInthischapter,weexaminetheforcesthemoveinterestratesandthetheoriesbehindthosemovements.Topicsinclude:–DeterminingAssetDemand–SupplyandDemandintheBondMarket–ChangesinEquilibriumInterestRatesCopyright©2009PearsonPrenticeHall.Allrightsreserved.4-4DeterminantsofAssetDemand•Anassetisapieceofpropertythatisastoreofvalue.Facingthequestionofwhethertobuyandholdanassetorwhethertobuyoneassetratherthananother,anindividualmustconsiderthefollowingfactors:1.Wealth,thetotalresourcesownedbytheindividual,includingallassets2.Expectedreturn(thereturnexpectedoverthenextperiod)ononeassetrelativetoalternativeassets3.Risk(thedegreeofuncertaintyassociatedwiththereturn)ononeassetrelativetoalternativeassets4.Liquidity(theeaseandspeedwithwhichanassetcanbeturnedintocash)relativetoalternativeassetsCopyright©2009PearsonPrenticeHall.Allrightsreserved.4-5EXAMPLE1:ExpectedReturnWhatistheexpectedreturnonanExxon-Mobilbondifthereturnis12%two-thirdsofthetimeand8%one-thirdofthetime?SolutionTheexpectedreturnis10.68%.Re=p1R1+p2R2wherep1=probabilityofoccurrenceofreturn1=2/3=.67R1=returninstate1=12%=0.12p2=probabilityofoccurrencereturn2=1/3=.33R2=returninstate2=8%=0.08ThusRe=(.67)(0.12)+(.33)(0.08)=0.1068=10.68%Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-6EXAMPLE2:StandardDeviation(a)Considerthefollowingtwocompaniesandtheirforecastedreturnsfortheupcomingyear:Fly-by-NightFeet-on-the-GroundProbability50%100%Return15%10%Probability50%Return5%Outcome1Outcome2Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-7EXAMPLE2:StandardDeviation(b)•WhatisthestandarddeviationofthereturnsontheFly-by-NightAirlinesstockandFeet-on-the-GroundBusCompany,withthereturnoutcomesandprobabilitiesdescribedabove?Ofthesetwostocks,whichisriskier?Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-8EXAMPLE2:StandardDeviation(c)•Solution–Fly-by-NightAirlineshasastandarddeviationofreturnsof5%.Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-9EXAMPLE2:StandardDeviation(d)•Feet-on-the-GroundBusCompanyhasastandarddeviationofreturnsof0%.Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-10EXAMPLE2:StandardDeviation(e)•Fly-by-NightAirlineshasastandarddeviationofreturnsof5%;Feet-on-the-GroundBusCompanyhasastandarddeviationofreturnsof0%•Clearly,Fly-by-NightAirlinesisariskierstockbecauseitsstandarddeviationofreturnsof5%ishigherthanthezerostandarddeviationofreturnsforFeet-on-the-GroundBusCompany,whichhasacertainreturn•Arisk-aversepersonprefersstockintheFeet-on-the-Ground(thesurething)toFly-by-Nightstock(theriskierasset),eventhoughthestockshavethesameexpectedreturn,10%.Bycontrast,apersonwhoprefersriskisariskpreferrerorrisklover.Weassumepeoplearerisk-averse,especiallyintheirfinancialdecisionsCopyright©2009PearsonPrenticeHall.Allrightsreserved.4-11DeterminantsofAssetDemand(2)•Thequantitydemandedofanassetdiffersbyfactor.1.Wealth:Holdingeverythingelseconstant,anincreaseinwealthraisesthequantitydemandedofanasset2.Expectedreturn:Anincreaseinanasset’sexpectedreturnrelativetothatofanalternativeasset,holdingeverythingelseunchanged,raisesthequantitydemandedoftheasset3.Risk:Holdingeverythingelseconstant,ifanasset’sriskrisesrelativetothatofalternativeassets,itsquantitydemandedwillfall4.Liquidity:Themoreliquidanassetisrelativetoalternativeassets,holdingeverythingelseunchanged,themoredesirableitis,andthegreaterwillbethequantitydemandedCopyright©2009PearsonPrenticeHall.Allrightsreserved.4-12DeterminantsofAssetDemand(3)Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-13Supply&DemandintheBondMarketWenowturnourattentiontothemechanicsofinterestrates.Thatis,wearegoingtoexaminehowinterestratesaredetermined–fromademandandsupplyperspective.Keepinmindthattheseforcesactdifferentlyindifferentbondmarkets.Thatis,currentsupply/demandconditionsinthecorporatebondmarketarenotnecessarilythesameas,say,inthemortgagemarket.However,becauseratestendtomovetogether,wewillproceedasifthereisoneinterestratefortheentireeconomy.Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-14TheDemandCurveLet’sstartwiththedemandcurve.Let’sconsideraone-yeardiscountbondwithafacevalueof$1,000.Inthiscase,thereturnonthisbondisentirelydeterminedbyitsprice.Thereturnis,then,thebond’syieldtomaturity.Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-15PointB:ifthebondwassellingfor$900.iReFPPP$950i$1000$950$950.0535.3%Bd100P$900i$1000$900$900.11111.1%Bd200DerivationofDemandCurvePointA:ifthebondwassellingfor$950.Copyright©2009PearsonPrenticeHall.Allrightsreserved.4-16DerivationofDemandCurveHowdoweknowthedemand(Bd)atpointAis100andatpointBis200?Well,wearejustmaking-upthosenumbers.Butweareapplyingbasiceconomics–morepeoplewillwant(demand)thebondsiftheexpectedreturnishigher.Copyright©2009PearsonPrent