货币金融学英文课件Lecture3

货币金融学英文课件Lecture3货币金融学英文课件Lecture3货币金融学英文课件Lecture3Moneyhastimevalue!Adollar($1)paidtodayhasahighervaluethanadollarpaidinfutureMoneycanbeusedtoinvestthereforegainmoremoneyinthefutureThepurchasingpowerofmoneywillchangeinlightoftheinflationrate2货币金融学英文课件Lecture3货币金融学英文课件Lect1Moneyhastimevalue!Adollar($1)paidtodayhasahighervaluethanadollarpaidinfutureMoneycanbeusedtoinvestthereforegainmoremoneyinthefutureThepurchasingpowerofmoneywillchangeinlightoftheinflationrate2Moneyhastimevalue!AdollarDifferentdebtinstrumentshavedifferentstreamofcashpayment(cashflow)withverydifferenttimingItisthereforenecessarytoknowhowthetwodifferentdebtinstrumentscanbecomparedTheconceptof‘presentvalue’isusedforthispurposePresentValue(PV)calculatesthecurrentvalueoffuturepaymentsMeasuringInterestRate3DifferentdebtinstrumentshavDiscountingtheFutureYouarejustashappyhaving$100todayashaving$110ayearfromnow,orashaving$121twoyearsfromnow,or$100(1+0.1)^nnyearsfromnow.4DiscountingtheFutureYouarePresentValuen=numberofyearsDiscountingtheFuture5PresentValuen=numberofyearTheconceptofPVisextremelyusefulbecauseitallowsustofigureouttoday’svalueofdebtmarketinstrumentThisinformationinturnallowsustocomparethevalueoftwodifferentinstrumentswithdifferenttimingoftheirpayments6TheconceptofPVisextremelyExample：7Example：78899TherearefourtypesofcreditmarketinstrumentsAsimpleloan(businessorcommercialloans) Lendersprovidestheborrowerwithanamountoffund,mustberepaidsomeinterestatmaturitydatealongwiththepaymentforinterestAfixedpaymentloan(fullyamortizedloan)（固定支付贷款） Itmustberepaidbymakingthesamepaymenteveryperiod,consistingofpartoftheprincipalandinterestforasetnumberofyearsAcouponbond(fixedinterestpayment)（息票贷款） Itpaysfixedinterestuntilmaturitydateandrepaysprincipalatmaturity(issuer,maturity,couponrate)Adiscountbond(azerocouponbond)ItdoesnotmakeanyinterestbutsoldatlessthanfacevalueAtmaturityfullfacevalueisrepaidTypesofCreditMarketInstruments10Therearefourtypesofc1111ThefourtypeofinstrumentsfollowdifferenttimelineforpaymentsSimpleloananddiscountbondmakepaymentonlyattheirmaturitydatesFixed-paymentloanandcouponbondshavepaymentsperiodicallyuntilmaturityNowthequestionishowtoselectthebest?TheconceptofPresentValueistheanswer,itprovidesuswithaprocedureformeasuringinterestratesondifferenttypesofinstrumentsTypesofCreditMarketInstruments12ThefourtypeofinstrumentsfYieldtoMaturityTheratethatequatesthe

presentvalueofcashflowpaymentsreceivedfromadebtinstrumentwith

itsvaluetoday13YieldtoMaturityTheratethatSimpleLoanIfPeterborrows$100fromhissisterandnextyearshewants$110backfromhim,whatistheyieldtomaturityonthisloan14SimpleLoanIfPeterborrows$1FixedPaymentLoanTocalculatetheyieldtomaturity,weequatetoday’svalueoftheloanwithitspresentvalue.Becausethefixed-paymentinvolvemorethanonecashflowpayment,thepresentvalueofthefixed-paymentloaniscalculatedasthesumofthepresentvaluesofallcashflowpayment.15FixedPaymentLoanTocalculateFixedPaymentLoan16FixedPaymentLoan1601225年1000126……126126……126(1+i)-1126(1+i)-2126(1+i)-25

i=12%1701225年1000126……126126……126(1+iExerciseYouneeda$100,000mortgage.Youtakeoutaloanwhichhasaninterestrateof8%,whatistheyearlypaymenttothebanktopayofftheloanintwentyyears?R=8%,LV=100,000,n=2018ExerciseYouneeda$100,000mCouponBondEquatetoday’svalueofbondwithitspresentvalueThepresentvalueofthebondiscalculatedasthesumofpresentvaluesofallthecouponpaymentplusthepresentvalueofthefinalpaymentofthefacevalueofthebond19CouponBondEquatetoday’svaluCouponBond20CouponBond2001210年1000100……100100＋1000……100(1+i)-1100(1+i)-21100(1+i)-10得i=10%2101210年1000100……100100＋1000……10ExerciseFindthepriceof10%couponbondwithafacevalueof$1000,a15%yieldtomaturity,and8yearstomaturityFV=1000,c=10%,r=15%,n=8,LV=?22ExerciseFindthepriceof10%Whenthecouponbondispricedatitsfacevalue,theyieldtomaturityequalsthecouponrateThepriceofacouponbondandtheyieldtomaturityarenegativelyrelatedTheyieldtomaturityisgreaterthanthecouponratewhenthebondpriceisbelowitsfacevalue23WhenthecouponbondispricedConsolorPerpetuityAbondwithnomaturitydatethatdoesnotrepayprincipalbutpaysfixedcouponpaymentsforeverP=C/1+i+C/(1+i)^2+C/(1+i)^3+….+…24ConsolorPerpetuityAbondwitCurrentYieldFourCharacteristics1.Forperpetuitybond,currentyieldisthesameasitsyieldtomaturity2.Whencouponbondhaslongtermtomaturity(twentyyearsmore),currentyieldisclosetoitsyieldtomaturity.3.Whenthepriceofbondequalsitsfacevalue,itscurrentyieldequalsitsyieldtomaturity.Whenp=parvalue,yieldtomaturity=couponrate,whilecouponrate=C/parvalue,,currentyield=C/P=C/parvalue=couponrateyieldtomaturity=currentyield4.Changeincurrentyieldalwayssignalschangeinsamedirectionasyieldtomaturity25CurrentYieldFourCharacteDiscountBondOneyeardiscountbond,facevalue1000,price900,yieldtoMaturityi=F-P/P=100/900=11.1%26DiscountBondOneyeardiscountYieldonaDiscountBasis27YieldonaDiscountBasis27YieldonaDiscountBasis Oneyearbill,P=$900,F=$1000 $1000–$900 360idb= x =0.0991000 365

TwoCharacteristicsUnderstatesyieldtomaturity;longerthematurity,greaterisunderstatementThediscountyieldisnegativelyrelatedtothepriceofthebond.Thediscountyieldmovetogetherwiththeyieldtomaturity28YieldonaDiscountBasis OneFollowtheFinancialNews:

BondPricesandInterestRates29FollowtheFinancialNews:

BoDistinctionBetweenInterestRatesandReturnsCanwecomparethebenefitofholdingdifferentdebtinstrumentsolelybytheyieldtomaturity?

Forapersonwhoownsalongtermbondyieldinga10%interestrate,Willhebebetteroffiftheinterestraterisesto20%?Howwellapersondoesbyholdingabondoranyothersecurityoveraparticulartimeperiodisaccuratelymeasuredbytherateofreturn.RateofReturn:isdefinedasthepaymenttotheownerplusthechangeinitsvalue,expressedasfractionofitspurchaseprice

30DistinctionBetweenInterestRRET＝returnfromholdingthebondfromtimettotimet+1Pt＝PriceofthebondattimetPt+1＝Priceofthebondattimet+1C＝couponpayment31RET＝returnfromholdingthebo

Eg:a$1000facevaluecouponbondwithcouponrateof10%isboughtat$1000,heldforoneyearandthensoldfor1200.whatistherateofreturninthiscase?Rateofreturn=[1000*10%+(1200-1000)]/1000=30%Whencouponisboughtatparvalue,Yieldtomaturityequalscouponratewhichwasonly10%Thereturnonabondwillnotnecessarilyequaltheyieldtmaturityonthatbond.

32Eg:a$1000facevaluecoupon

Cwhere:ic= =currentyield Pt Pt+1–Pt g= =capitalgain PtEEvenforabondforwhichthecurrentyieldisanaccuratemeasureOftheyieldtomaturity,thereturncandiffersubstantiallyfromtheInterestrate.EspeciallyiftherearesizablefluctuationsinthepriceOfbondthatproducesubstantialcapitalgainsorloss.33 CEEvenforabondforwhichKeyFactsaboutRelationship

BetweenInterestRatesandReturns34KeyFactsaboutRelationship

BTheonlybondwhosereturnequalstheinitialyieldtomaturityisonewhosetimetomaturityisthesameastheholdingperiodForbondswithmaturity>holdingperiod,ariseininterestisassociatedwithfallinprice,resultingincapitallossLongerismaturity,greateris%pricechangeassociatedwithinterestratechangeLongerismaturity,morereturnchangeswithchangeininterestrate5. Bondwithhighinitialinterestratecanstillhavenegativereturnifinterestraterises35Theonlybondwhosereturnequ

InterestRateRiskConclusions1.Pricesandreturnsaremorevolatileforlong-termbondsthanthoseforshort-termbondbecauselong-termbondhavehigherinterest-raterisk2.Nointerest-rateriskforanybondwhosematurityequalsholdingperiod36

InterestRateRiskConclusionsThekeytounderstandwhythereisnointerestrateriskforanybondwhosetimetomaturitymatchestheholdingperiodistorecognizethatinthiscase,thepriceattheendoftheholdingperiodisalreadyfixedatthefacevalue.Thechangeininterestratescanhavenoeffectonthepriceattheendoftheholdingperiodforthesebonds,thereforetherateofreturnwillbeequaltotheyieldtomaturity37ThekeytounderstandwhytherExerciseFrancinetheFinancialAdvisorhasjustgivenyouthefollowingadvice:Long-termbondsareagreatinvestmentbecausetheirinterestrateisover20%.IsFrancinenecessarilyright?38ExerciseFrancinetheFinanDistinctionBetweenReal

andNominalInterestRatesRealInterestRateInterestratethatisadjustedforexpectedchangesinthepricelevel

ir=i-e1. Realinterestratemoreaccuratelyreflectstruecostofborrowing2. Whenrealrateislow,greaterincentivestoborrowandlesstolend if i=5%ande=3%then:

ir=5%–3%=2% if i=8%ande=10%then

ir=8%–10%=–2%39DistinctionBetweenReal

andFisherEquation40FisherEquation404141CaseStudy:China’sinteresthikeandstockmarketperformancein2007Intheyearof2007,China’scentralbankraisedinterestratefivetimesinhopingtocurbstockmarketandcoolitseconomy.

42CaseStudy:China’sinteresthWhataretobeexpected?StockMarketInvestment43Whataretobeexpected?StocSomeEvidencesNormal?Abnormal?Why?44SomeEvidencesNormal?Abnor 谢谢大家！ 谢谢大家！45货币金融学英文课件Lecture3货币金融学英文课件Lecture3货币金融学英文课件Lecture3Moneyhastimevalue!Adollar($1)paidtodayhasahighervaluethanadollarpaidinfutureMoneycanbeusedtoinvestthereforegainmoremoneyinthefutureThepurchasingpowerofmoneywillchangeinlightoftheinflationrate2货币金融学英文课件Lecture3货币金融学英文课件Lect46Moneyhastimevalue!Adollar($1)paidtodayhasahighervaluethanadollarpaidinfutureMoneycanbeusedtoinvestthereforegainmoremoneyinthefutureThepurchasingpowerofmoneywillchangeinlightoftheinflationrate47Moneyhastimevalue!AdollarDifferentdebtinstrumentshavedifferentstreamofcashpayment(cashflow)withverydifferenttimingItisthereforenecessarytoknowhowthetwodifferentdebtinstrumentscanbecomparedTheconceptof‘presentvalue’isusedforthispurposePresentValue(PV)calculatesthecurrentvalueoffuturepaymentsMeasuringInterestRate48DifferentdebtinstrumentshavDiscountingtheFutureYouarejustashappyhaving$100todayashaving$110ayearfromnow,orashaving$121twoyearsfromnow,or$100(1+0.1)^nnyearsfromnow.49DiscountingtheFutureYouarePresentValuen=numberofyearsDiscountingtheFuture50PresentValuen=numberofyearTheconceptofPVisextremelyusefulbecauseitallowsustofigureouttoday’svalueofdebtmarketinstrumentThisinformationinturnallowsustocomparethevalueoftwodifferentinstrumentswithdifferenttimingoftheirpayments51TheconceptofPVisextremelyExample：52Example：7538549TherearefourtypesofcreditmarketinstrumentsAsimpleloan(businessorcommercialloans) Lendersprovidestheborrowerwithanamountoffund,mustberepaidsomeinterestatmaturitydatealongwiththepaymentforinterestAfixedpaymentloan(fullyamortizedloan)（固定支付贷款） Itmustberepaidbymakingthesamepaymenteveryperiod,consistingofpartoftheprincipalandinterestforasetnumberofyearsAcouponbond(fixedinterestpayment)（息票贷款） Itpaysfixedinterestuntilmaturitydateandrepaysprincipalatmaturity(issuer,maturity,couponrate)Adiscountbond(azerocouponbond)ItdoesnotmakeanyinterestbutsoldatlessthanfacevalueAtmaturityfullfacevalueisrepaidTypesofCreditMarketInstruments55Therearefourtypesofc5611ThefourtypeofinstrumentsfollowdifferenttimelineforpaymentsSimpleloananddiscountbondmakepaymentonlyattheirmaturitydatesFixed-paymentloanandcouponbondshavepaymentsperiodicallyuntilmaturityNowthequestionishowtoselectthebest?TheconceptofPresentValueistheanswer,itprovidesuswithaprocedureformeasuringinterestratesondifferenttypesofinstrumentsTypesofCreditMarketInstruments57ThefourtypeofinstrumentsfYieldtoMaturityTheratethatequatesthe

presentvalueofcashflowpaymentsreceivedfromadebtinstrumentwith

itsvaluetoday58YieldtoMaturityTheratethatSimpleLoanIfPeterborrows$100fromhissisterandnextyearshewants$110backfromhim,whatistheyieldtomaturityonthisloan59SimpleLoanIfPeterborrows$1FixedPaymentLoanTocalculatetheyieldtomaturity,weequatetoday’svalueoftheloanwithitspresentvalue.Becausethefixed-paymentinvolvemorethanonecashflowpayment,thepresentvalueofthefixed-paymentloaniscalculatedasthesumofthepresentvaluesofallcashflowpayment.60FixedPaymentLoanTocalculateFixedPaymentLoan61FixedPaymentLoan1601225年1000126……126126……126(1+i)-1126(1+i)-2126(1+i)-25

i=12%6201225年1000126……126126……126(1+iExerciseYouneeda$100,000mortgage.Youtakeoutaloanwhichhasaninterestrateof8%,whatistheyearlypaymenttothebanktopayofftheloanintwentyyears?R=8%,LV=100,000,n=2063ExerciseYouneeda$100,000mCouponBondEquatetoday’svalueofbondwithitspresentvalueThepresentvalueofthebondiscalculatedasthesumofpresentvaluesofallthecouponpaymentplusthepresentvalueofthefinalpaymentofthefacevalueofthebond64CouponBondEquatetoday’svaluCouponBond65CouponBond2001210年1000100……100100＋1000……100(1+i)-1100(1+i)-21100(1+i)-10得i=10%6601210年1000100……100100＋1000……10ExerciseFindthepriceof10%couponbondwithafacevalueof$1000,a15%yieldtomaturity,and8yearstomaturityFV=1000,c=10%,r=15%,n=8,LV=?67ExerciseFindthepriceof10%Whenthecouponbondispricedatitsfacevalue,theyieldtomaturityequalsthecouponrateThepriceofacouponbondandtheyieldtomaturityarenegativelyrelatedTheyieldtomaturityisgreaterthanthecouponratewhenthebondpriceisbelowitsfacevalue68WhenthecouponbondispricedConsolorPerpetuityAbondwithnomaturitydatethatdoesnotrepayprincipalbutpaysfixedcouponpaymentsforeverP=C/1+i+C/(1+i)^2+C/(1+i)^3+….+…69ConsolorPerpetuityAbondwitCurrentYieldFourCharacteristics1.Forperpetuitybond,currentyieldisthesameasitsyieldtomaturity2.Whencouponbondhaslongtermtomaturity(twentyyearsmore),currentyieldisclosetoitsyieldtomaturity.3.Whenthepriceofbondequalsitsfacevalue,itscurrentyieldequalsitsyieldtomaturity.Whenp=parvalue,yieldtomaturity=couponrate,whilecouponrate=C/parvalue,,currentyield=C/P=C/parvalue=couponrateyieldtomaturity=currentyield4.Changeincurrentyieldalwayssignalschangeinsamedirectionasyieldtomaturity70CurrentYieldFourCharacteDiscountBondOneyeardiscountbond,facevalue1000,price900,yieldtoMaturityi=F-P/P=100/900=11.1%71DiscountBondOneyeardiscountYieldonaDiscountBasis72YieldonaDiscountBasis27YieldonaDiscountBasis Oneyearbill,P=$900,F=$1000 $1000–$900 360idb= x =0.0991000 365

TwoCharacteristicsUnderstatesyieldtomaturity;longerthematurity,greaterisunderstatementThediscountyieldisnegativelyrelatedtothepriceofthebond.Thediscountyieldmovetogetherwiththeyieldtomaturity73YieldonaDiscountBasis OneFollowtheFinancialNews:

BondPricesandInterestRates74FollowtheFinancialNews:

BoDistinctionBetweenInterestRatesandReturnsCanwecomparethebenefitofholdingdifferentdebtinstrumentsolelybytheyieldtomaturity?

Forapersonwhoownsalongtermbondyieldinga10%interestrate,Willhebebetteroffiftheinterestraterisesto20%?Howwellapersondoesbyholdingabondoranyothersecurityoveraparticulartimeperiodisaccuratelymeasuredbytherateofreturn.RateofReturn:isdefinedasthepaymenttotheownerplusthechangeinitsvalue,expressedasfractionofitspurchaseprice

75DistinctionBetweenInterestRRET＝returnfromholdingthebondfromtimettotimet+1Pt＝PriceofthebondattimetPt+1＝Priceofthebondattimet+1C＝couponpayment76RET＝returnfromholdingthebo

Eg:a$1000facevaluecouponbondwithcouponrateof10%isboughtat$1000,heldforoneyearandthensoldfor1200.whatistherateofreturninthiscase?Rateofreturn=[1000*10%+(1200-1000)]/1000=30%Whencouponisboughtatparvalue,Yieldtomaturityequalscouponratewhichwasonly10%Thereturnonabondwillnotnecessarilyequaltheyieldtmaturityonthatbond.

77Eg:a$1000facevaluecoupon

Cwhere:ic= =currentyield Pt Pt+1–Pt g= =capitalgain PtEEvenforabondforwhichthecurrentyieldisanaccuratemeasureOftheyieldtomaturity,thereturncandiffersubstantiallyfromtheInterestrate.EspeciallyiftherearesizablefluctuationsinthepriceOfbondthatproducesubstantialcapitalgainsorloss.78 CEEvenforabondforwhichKeyFactsaboutRelationship

BetweenInterestRatesandReturns79KeyFactsaboutRelationship

BTheonlybondwhosereturnequalstheinitialyieldtomaturityisonewhosetimetomaturityisthesameastheholdingperiodForbondswithmaturity>holdingperiod,ariseininterestisassociatedwithfallinprice,resultingincapitallossLongerismaturity,greateris%pricechangeassociatedwithinterestratechangeLongerismaturity,