Asset returns and prices

Asset returns and prices - Lecture#12 Asset Returns and...

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Econ1110, Spring 2008, Professor Ted 1 Lecture #12 Asset Returns and Prices: Term Structure and Tobin’s Q
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Econ1110, Spring 2008, Professor Ted 2 Cross-Sectional Differences in Yields Maturity – term structure Default risk Tax status
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Econ1110, Spring 2008, Professor Ted 3 Yields on December 9, 2005 3-Month T Bill 3.94 Corporate AAA - 10-Year 5.75 6-Month T Bill 4.27 Corporate A - 10-Year 5.88 5-Year T Note 4.43 Municipal AAA - 10-Year 3.90 10-Year T Bond 4.53 Municipal A - 10-Year 4.22 30-Year T Bond 4.73 CDs - 10-Year 6.00
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Econ1110, Spring 2008, Professor Ted 4 Yield Curve (November, various years) 0 2 4 6 8 10 12 14 16 3 month 6 month 1 year 2 year 5 year 7 year 10 year 20 year 30 year % per year 1980 1985 1989 2000 2001 2005 1995
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Econ1110, Spring 2008, Professor Ted 5 Facts About Yield Curve Fact 1 : Yield curve usually slopes upward Fact 2 : Long and short rates usually move together (see next slide) Justifies “the” interest rate Fact 3 : Short rates are more volatile than long rates Fact 3a : Yield curve slopes upward when rates are low; yield curve slopes downward when rates are high
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Econ1110, Spring 2008, Professor Ted 6 Interest Rates, Various Maturities January 1934 - November 2005 0 2 4 6 8 10 12 14
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Asset returns and prices - Lecture#12 Asset Returns and...

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