Bring your calculators today!!


• Chapter 9: The Bond Market Financial Instruments
  • US Government securities: U.S. Treasuries mostly
  • Capital Market Interest Rates
  • Corporate bonds
  • Problem Set #3 - Due April 17th!
  • US Government Agency securities (Especially Fannie Mae and Freddie Mac - See Mortgage Chapter too!)
  • State and Local Gov't
• Quiz today - To buy a Muni or Corporate Bond - Marginal Tax Rate consideration (MTR)
• Mishkin's Chapter 9 PPT - The Bond Market
• Only Handwritten answers, please. For Tuesday, April 15, 2014 find the current 10 yr. U.S. Treasury Note rate, 30 yr. U.S. Treasury Bond rate, average corporate bond AAA and BBB rates, 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 9 for definitions, etc. (Also the Ch. 9 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 English classes) AND do NOT use Inflation Indexed Bonds!





• Addition to 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!
• Day 6 PPT - Government Budget Constraint

            Week 2

April 1, 2014   -  Finish Chapter 3  and begin Chapter 4: The Behavior of Interest Rates

• Bring your calculators today!!
• A Bank's Liabilities - IOUs (What's an IOU?) What is money?
• Some of these we did last week too: Consol Bond and Price versus Interest Rate
  • 1. Simple Present Value of a Future Amount
  • 2. Fixed Payment Loans - Yield-to-Maturity
  • 3. Coupon Bond Calculations - VERY IMPORTANT!!
  • 4. Discount Bonds - U.S. Treasury Bills, for example
  • Problem Set 2 due April 8, 2014 - NOW Available! 20 points
  • Treasury Issues for Problem Set 2
  • Return versus interest rate - capital gains/losses
  • Reinvestment Risk
• Mishkin's Chapter 4 PPT
• The Theory of Asset Demand
  • Wealth
  • Expected return
  • Risk
  • Liquidity
• Also the Benefits of Diversification



• Chapter 4: The Bond Market and 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
  
  
  
• Chapter 7: The Fed
- Mishkin's Chapter 7 PPT
• Central Banks - the Fed and the PBOC (People's Bank of China)
• 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
• Day 3 PPT - Review of Class