Parkes' Financial Institutions and Markets Assignments Page

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 Course Assignments and Tentative Outline:

      Week 10

March 9, 2010      Chapter 19: Insurance Companies and Pension Funds

• Bring your calculators today!!
• Homework on options markets and interest rates swaps is DUE Today.
• Day 19 PPT - Options Homework Notes
• Mishkin Chapter 19 PPT - Insurance Companies and Pension Funds
• Chapter 19: Insurance Companies and Pension Funds
  • Insurance Companies - certainty equivalent
  • Fundamentals of Insurance
  • Adverse Selection and Moral Hazard
  • Deductible

March 11, 2010   -  REVIEW FOR THE FINAL EXAM!
• Review today
• All homework returned
• Day 20 PPT - Review!
• Chapter 19: Insurance Companies and Pension Funds
  • Growth and Organization of Insurance Companies
  • Types of Insurance
    
• Securities Industry and the Glass-Steagall Act - Paul Volker, do we need another Wall Between Commercial Banks and Securities Dealers?

• Forex homework due today - See Day 12 PPT
• Review the Midterm Exam - 1st Class period
• Zhou Xiaochuan says loose policy may change soon.
• Second Class Period:
• Chapter 12: Foreign Exchange Markets
  • Day 13 PPT - Using Import Prices to control inflation
  • Exchange Rates in the Short-Run
    • Equilibrium in the Foreign Exchange Market
    • Expected Returns - Domestic versus Foreign
    • The Interest Parity Condition
    • Equilibrium in the Foreign Exchange Market
  • Explaining Changes in Exchange Rates

• Foreign Interest Rate homework due today - See Day 13 PPT - Postponed
• Chapter 12: Foreign Exchange Markets
  • Explaining Changes in Exchange Rates
  • The Exchange Rate Overshooting Model
• Day 14 PPT - Bank Management
• Mishkin Chapter 15 PPT - Bank Management
  • Chapter 15: The Banking Firm and Bank Management
    • The Bank Balance Sheet - Know the Basic 4 Assets and 4 Liabilities!
  • Basic Operation of a Bank

      Week 5

December 29, 2009     Finish Chapter 10: Stocks and begin Chapter 11: Mortgages

• Problem Set 3 due at the beginning of class today!
• Day 9 PPT - Some basic information about mortgages
• Day 9 PPT - Quiz #7 Answers
• Finish Corporate Stocks discussion and homework
• Mishin Our end of Ch. 10 the NEW Chapter 11 PPT: Stocks! Notice in Edition 5 of Mishkin's Textbook, Chapter 11: Stock Markets, is a separate chapter.
• Bring your calculators today!!
• Mortgage "Points" quiz!
• Mortgages - Today's mortgage market
• Chapter 11: The Mortgage Market
• Mishin Chapter 11 PPT: Mortgages! (Called Chapter 12 on PPT)
• Types of Mortgage Loans
  • Conventional or Standard
  • ARMs - Adjustable Rate Mortgages
  • Others
• Characteristics of the Residential Mortgage
  • Mortgage interest rates
  • Points
  • PMI
  • Mortgage Loan Amortization
  • Computing the Payment on a Mortgage
• Monday, January 4 at 6:30 pm will be the Midterm Exam!

• Chapter 11: Mortgage Investments continued
  • PMI
  • Mortgage Loan Amortization
  • Computing the Payment on a Mortgage
• Mishkin Pages on FF: Pages 393, 394, 395, 396, 397, 398.
  Also Day 10 PPT: What are Fed Funds?
• Mortgages continued - Today's mortgage market
  • Secondary Mortgage Market: FNMA, GNMA and FHLMA
  • Mortgage Backed Securities
  • CDOs and CMOs
  • Click here for a basic primer on MBS and CMO/CDO
  • Also here is an article from the New York Times entitled "What's it all Worth?"
  • Day 10 - Supplemental PPT - Repo and Reverse Repo and the Fed
  • Day 10 PPT - "MBS and Pass-Through definitions" from Investopedia
  
  
• Preview for the Midterm Exam on Monday, January 4, 2010 at 6:30 pm

      Week 4

December 22, 2009   -  Chapter 10: The Bond Markets

• Chapter 10: Capital Market Financial Instruments
  • US Government securities: U.S. Treasuries mostly
  • Capital Market Interest Rates
  • Corporate bonds
  • US Government Agency securities (Especially Fannie Mae and Freddie Mac - See Mortgage Chapter too!)
  • State and Local Gov't
  
  
• Problem Set #3 - Bond Homework
• Thanks to one of our Students who found the calculators below
  • Link to the TI BAII Plus Calculator
  • The HP 10B ALSO a GREAT Calculator
  • - these are expensive but ...On Taobao, You CAN buy one of these calculators:
  • HP 10B
  • or the TI BAII Plus
• NOW can anyone find a CHEAPER Chinese brand of the same Business Analyst calculator? - They must have the 5 functions: FV, PV, I/Y, PMT, N.
• You may use these calculators on the exam and I will show you how to use them, if you so desire.
• Day 7 PPT
• Supplemental Day 7 PPT - "Call" Bond Calculations and Bankruptcy stuff

      Week 3

December 15, 2009   -  Finish 8 and begin Chapter 9: The Money Markets

• Bring your calculators today!!
• Problem Set 2 due TODAY!
• The Loanable Funds "Framework" Revisited:
  • 3 MORE Applications - 1. "The Fisher Effect," 2. Negative Savings Rates and 3. Government Budget Deficit
• The "Tools" and the Affect upon the Money Supply - Notice the PPT
• Day 5 PPT - "Money" Rates
• Mishkin's Chapter 9 PPT - The Money Market
• Mishkin's Chapter 10 PPT - The Bond Market


• Chapter 9: Money Market Financial Instruments
  • US Treasury Bills
  • Negotiable CDs
  • Commercial Paper (know those three components of this one)
  
  

• Chapter 9: Money Market Financial Instruments
  • US Treasury Bills
  • Negotiable CDs
  • Commercial Paper (know those three components of this one)
  • Banker's Acceptances
  • Federal Funds - Daily and Target FF rates, 2008
    • The Federal Funds Market - Changed since our book - notice the "FUNKY" Supply curve in the PPT
    • What are Federal Funds? A great definition question for the Mid-term exam! (See pg. 262)
  • Eurodollars
  
  
• The LAST part of Chapter 4:
  • Liquidity Preference "Framework:" The Supply and Demand for Money (End of Chapter 4 in our book)
    • 1st note: Quantity of Assets Supplied = Quantity of Assets Demanded
    • 2nd note: The interest rate is the opportunity cost of holding money - it's like the price of money
    • Shifts in Demand for and Supply of MONEY
    • Applications: Boom/Recession in the Economy, Price level changes, Money Supply Changes
    • Compare the results for Booms/Recessions with the Loanable Funds Framework - they are equivalent!
    • Higher GROWTH RATE in the Money Supply: the "Effects" Last topic in Chapter 4
• Day 6 PPT

      Week 2

December 8, 2009   -  Finish Chapter 3  and begin Chapter 4: The Behavior of Interest Rates

• Bring your calculators today!!
• Let's do the calculations: Consol Bond and Price versus Interest Rate
  • 4. Discount Bonds - U.S. Treasury Bills, for example
  • Return versus interest rate - capital gains/losses
  • Reinvestment Risk
• Central Banks - the Fed and the PBC (People's Bank of China)
• Mishkin's Chapter 4 PPT
• The Theory of Asset Demand
  • Wealth
  • Expected return
  • Risk
  • Liquidity
  • Also the Benefits of Diversification
• Money Rates - Note that data may be found in the Federal Reserve Board of Governor's website.
  • Only Handwritten answers, please. For Thursday, December 10, 2009 find the prime rate, near closing bid Fed Funds rate, commercial paper rate, T-Bill rate and LIBOR rate. Hint see p. 273. (5 pts)
  • Make sure to include the date you are quoting these numbers from (like a citation in ACAD 103 and 201)
  • Three Places worth looking for rates for Tuesday:
    • Bloomberg's Rates and Bonds (Hint - click on "Key Rates")
    • At the FED - Commercial Paper rates!
    • Wall Street Journal - "Bonds"
    • Money Rates
    • Bankrate.com
• Day 3 PPT - A little on Commodities Markets


• The Loanable Funds "Framework"
  • Notice the y-t-m (interest rate) IS the expected return!
  • Key also is that "The interest rate is the inverse of the Price of a Bond"
  • Look at BOTH graphs - The Bond Market, which is the inverse of the Loanable Funds Market
  • "Shifts"
    • Demand, know the Theory of Asset Demand
    • Supply, Booms/Recessions, Expected Inflation and Government Activities
  • 4 Applications - 1. "The Fisher Effect," 2. Business Cycles, 3. Negative Savings Rates and 4. Government Budget Deficit
• Credit Markets and the Yield Curve
• Day 3a PPT - CPI, IP, and many other notes!
• Problem Set 2 - assigned today - "Interest rate calculations" Due on December 15, 2009
• Treasury Issues for Problem Set 2
• Only Handwritten answers, please. For Tuesday, December 15, 2009 find the current 10 yr. U.S. Treasury Note rate, 30 yr. U.S. Treasury Bond rate, average corporate bond AAA and BBB rates (see p. 293), and the a recent municipal bond rate. (5 pts)
• At the Fed: Here is a good website for the Current Rates - pick only the ones that you need. Printing this page will only get you one point!
• See Chapter 10 for definitions, etc. (Also the Ch. 10 PPT). These rates are all available from the Fed's website.


• Make sure to include the date you are quoting these numbers from (like a citation in ACAD 103 and 201) AND do NOT use Inflation Indexed Bonds!

• Bring your calculators today!!
• Quiz today - calculate some growth rates!
• Problem Set 2 due next class - TUTORIAL AT THE BEGINNING OF CLASS TODAY!
• Chapter 8: The Fed
- Mishkin's Chapter 8 PPT
• The Fed's Balance Sheet
• Open Market Operations versus Discount lending - how does each affect the balance sheet
• The "Tools" and the Affect upon the Money Supply - Notice the PPT
• Tools of the Central Bank: Open Market Operations (Buying and Selling Bonds), Discount Rate, Required Reserve Rate
• Supplemental Day 4a PPT - Problem Set 2 Thoughts
• Chapter 8 continued - The Fed tools...
  • Tools of the Central Bank: Open Market Operations (Buying and Selling Bonds), Discount Rate, Required Reserve Rate
  • The Fed: Goals and Targets - we will talk about the Central Bank ALL term, but one last topic at the end of Chapter 8
• Day 4 PPT - The Fed Tools in brief!

      Week 1

December 1, 2009  -  An Introduction and begin Chapter 3: Understanding Interest Rates

• An Introduction to Financial Institutions and Markets
• Chapter 1: Very Briefly, Financial Markets
  • Mishkin's Chapter 1 PPT    READING - FYI *(For Your Information)*!
  • Debt Markets and Interest Rates (SHIBOR?!)
  • Graph - T-Bills versus US Gov't Bonds versus Corporate Bonds - what's the difference? Page 5
  • "The interest Rate" - notice that (mostly) all interest rates track together
• Stock Markets
• Foreign Exchange Markets
• The Yuan Now Pegged to the Dollar again!?!
• Mishkin's Chapter 3 PPT
• QUIZ - the 3 Goals of any MACROECONOMY! and 3 indicators!
• Problem Set I - AVAILABLE HERE!
  NO TYPING! The Homework is due Thursday, December 3, 2009 at the beginning of class for 15 points.
• Central Banks - the Fed and the PBC (People's Bank of China)
• The Money Supply and Financial Intermediaries
• Day 1 PPT - An Introduction

• Problem Set 1 due today! After I collect them, the assignments are late and 3 points will be subtracted. NO TYPING!
• What is a price index and how do we calculate them?  CPI, GDP deflator
• Growth rates (inflation rate) will also be calculated.
• Bring your calculators today!!
• What is the value of any index at the base year?
• Mishkin's Chapter 2 PPT - For Review and Reading
• Growth rates (inflation rate) will also be calculated.
• Real versus Nominal Wage rates
• Some key concepts from your reading of Chapter 2: (See PPT)
  • Primary and Secondary Markets
  • Adverse Selection and Moral Hazard
  • Transaction Costs and Economies of Scale
• A Bank's Liabilities - IOUs (What's an IOU?) What is money?
• Let's do the calculations:
  • Simple Present Value
  • Simple Loan
  • 1. Simple Present Value of a Future Amount
  • 2. Fixed Payment Loans - Yield-to-Maturity
  • 3. Coupon Bond Calculations - VERY IMPORTANT!!
• Day 2 PPT - Basic information about Chapter 2 - read Chapter 2 on your own! REQUIRED!~

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email: andrew at andrewparkes.com
Last Update: December 1, 2009
By Andrew L. H. Parkes, Ph. D.