{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

AppendixtoRWJCh5

AppendixtoRWJCh5 - :7'wa;~ 36:2 mm(333’ L ‘1’ Q:1...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: «:7 'wa .. ' ;~ 36. :2 mm (333’: L ‘1’ Q :1: The Tam Stratum Of interest Rama 5pm: Rama, and Yieid to Maturity in the main Miy 0f thia mama, WE: have agsuslm‘i that ihié imarasi wk: '13 Ci‘mswm 0%? 1131 {aims parimisa; in: waiuy: interest miea vary tim‘mgh tima This mums miimriiy because, is» fiathm T3363; 2m: mpscmd m (Eiffer through flint”; Tu iiiustram; we cumifier {WU mfwwugxm bands. Band A 3:»; :1 usa€~y¢ar bond and Emmi 8 is; a»; {wwywr baud, Bath have face mamas (3f 33‘ i 33%,, Tim (mewyear éntereat mm; rt: 1:: 8 gafircem, Th3 nwwyear flames? rate, r is $0 wn‘cem, 'I’l‘zew twu rates 0f inflates: am examgfim of 3pm mm Perhaps this; inaquaiity ii"; interggi’ 1:22:63; mam; became iaflatitm is €X§3€i£fi€€£i m 386: higher may tbs aamm’i yam (hm: {war {he fixs: yam: ”111:: We Mada; are dammed m i315 i‘wiiwwing time 13312111, 0 Year 1 1 Year 2 2 +——————+————— BondA 4—--— 8% ——-—> $1,000 Bond B 10% $1,000 Wt: mm aiasziiy czfiwiate {he gamma? valua far band A and mm 1;? as PW V2996; ‘93 :Efiziiéé‘fl 1,3 """ .4 my. ; » y ,,,,,, 3‘68 $1,000 PV., ::::;: ,1,” 269,45 2:: »~«WW..M:. E $8 < 1.30 )4 Of mime; @1931"; and P‘Vg weft: cabsewabie and tha 39011 $313163; wan), ma: we: amid (istgjrmim: the 9pm? rates; tasmg the: PV formula: baggage 351 W} $935533 .~. , and W ”my; )5; :::::: 28C? (,1 w » 9&8 :::;:: 3&3645 3:: Nam: we: can we haw the mica: of man’s-:2 wmgfiiuaied immds am dfiisrmézmi, Try :0 {30 the flex: wampia, i3 iiéuaimtm flax: diffflmw beiwaw 3pm mm; and yiaifig it; mawfim Given the we: rates; is equaés S percem am} :2 aquafifi H} gamma what 5%:qu a Ewmmam magma; twang/ear band nasaTM c3511 flaws (if; and {:2 are E§§usim€zed m the aroéimwing {Ema mart, 0 Year 1 1 Year 2 2 ? E i 1 M8%—~——W$50 w 10% W S) ,050 The Mad can be viewed as a gsartfaiia (a? zemmmgm bands wit?! {anew and iwwyaaar maturigées; Therefiwe; Cancept Question WfiéE EEEM want m AaEAEEEEEtEE :E 3% EAgEe Eats EEAE the AQEECE WE: EEO EEE Es EA): SQEVEE‘Eg Em A: EEA EE’ES EErEEEEzEwEEAg EEEEEEAAEEAEE: rm, EEE {A2}, E’ eQAEaES 9 93 EAeEceEEE As m’éfitémmé m EEEE3 CEmEZKQE’, WEE ErzEEE 2y AEEe EIE‘EEEE, Ar) EEEEEEEEEEEy EZEE‘E tE’EEi AAAEEEEE 30E vEEEg {m A EEEE‘ Es EEEEEEEEAEEAAE EEEAEAEE Es gAEmEAEE y EEAEEEE E3); EEEEEAEEs 0E WAKE AEEEE EsE Em: E\AE’EEEEE: EEAEE: can take EEEEEE:EE ASEE‘EEEE WEEE'E EAEEEAAE‘ AEEE'E EseEACEE. E‘Ei EA VEE‘EEXEEE}? 'EEAS‘EAEAEAEEEAGEEA m: a EEEEE'EEE~EAE::EEE EtzEéatEEEAEEEE: EA is WEAEAEEWEEEEEA EC} ACEEEAE‘ASE EEEEEEEEA‘EQEI {A E} am AEEAEEEEEEAEE {AZ}; EEE EAEE; we use EEEe EE'EAE’EAEE‘WEEEA Amt E'EEEEEE; m EEEEAeAmEEEA EE‘EEE EEEEQE: ErEE EEEEA EEEAEEEE; (JEEAQEE we gm EIEAe Emmi EEEAEAEA; WA use EAR} EEE AAEEAE» EEEEE: Em yEeEiE ACE EAAE'EAEEEAEEAA BAAAEESA equanémn {A E} EAEEAEAEQAEA Ewc: 5pm Exes WEEEEE‘EEAA CREE)? EAE‘Ee AEEEAAAEEEA EEE EAR}, we mm AEE'EEEEE (3E yEeEEE CE) EE‘EBEZAAE*EK}7‘ as same: mm: (LEE average 0% EZEKE AWE: 3pm mags,” UsEEEg the 323mm spa}: ratemfie yEeEEi m EEEAAEEE’EQA GE 2E Ewmyeav (ICEEEEpQE‘E EMDEECE whese magma mm E5 E2 ng’ceEAE MACE EE‘E” equais $EEEZE3E$33 ErzEEE EEA EEEEEEEE‘EEEEEEEEEE EA): $E2§4 AAA EEE3EAEA . $ 3 E E EE 3E , «««;«E A 9.S9% As EEEEEse CaECAEEfitEQElS Show 1;ch E30ml'ES WEEEE the same EAEAEAEE‘EE); wEEE EESEEEEEE)» have cEEfEEEEEEEEE yEeEEEA E0 E'EEAAAEE‘EEy if the mapmns EEEffeE: QE‘A‘EpE‘EEEIg the Term Structure "EPA: 36"}??? ,‘EZ’E’EEE‘HH‘E’ EEAAAEsEAEAAA EE‘EEA E’EEEE’EEEEEEEAEEEEE EEE" AEEEEE E‘EEEEEEE AA‘EEEE EEEE‘EEEE’AEEE EEAEEEEEEEEEEEA E"E‘EA.3EEEE3‘E 5A E gE’EEEEEEA EE EEEEE‘EEAEEEEEEE’ zEsE‘EEE AEE‘EEE’EEEE‘E? EEE EEEEA EEE‘EE ‘EAE EEEE: gEEEEE EEEEEES AEEEE? EEEEEAaEAEEEEf \AEEEE EEEEEgEE EEEEEEEEEEEEAEA EEE LEE EA E _ A .E‘», - EE EEEEEEEEE EMA? EEA: EAEE‘EEE AEE’EICEEEEE: A; may EE WEE EAEEEE EEEAEA‘EE‘EE: AEAEEEE EEEEAEA EE EEE EEEEEEEEEEEEEE A EEEEA EE‘EEE EA: EEEEEEEA EEEEEAE EE EEEJEA: E. EtmeEUgEE ?A:‘E’()~~ASAEKE§'EUEE gEWCHEEEmEEE EEEEEEEEA. A EfE‘E‘CE} EQE‘EEE AEE’EEEEEEEEE3 AEEEfEE EEEE; EEEEEE EEE figure ‘EAE EAAEEAEA EEEE' EEEEEA' EE EEEEEEEEEAEEE EEE EEEEEE. EEE ENE A M E EEEEjE,~ EEE E‘AEEEE EEEEEE‘A’TEEE‘E E‘EEEATSA‘ ZiE’A? EEEAthjxf EEEE’EEEEEEEEEE EE‘E EEEe: EEA’XE EEEEEEEEEEA :AEEEEEE-EE (E mEEEE ’Es EAEEEE EEEEEAEgh EEEEEEA EAEEEEEEEEEE E‘EEE’EEE SiE’EEA’EEEE‘fi VEEEEEEEE EEA'EEA‘E EEE EEE:EEE AA-E Spot interest rates ‘70) 14 INT 0 w‘ 12 ar} 10- 4) (3*. [Q “er Tfime (years) EEWAEAEi‘mEE EEEEEEEAEEEE mix" A E}: EE EAE EE': EAE'EE Em; A EEEE A; NE: W EE bond How w: i EEEEEEEEMEAEEEAEEJEA EEMEE 2: .zgxph EE:E E Eszg: Wm: ‘Esm Eds ME EffEiiEhEElilélEEE‘} Emu: EA'AEEEEffEEii\A‘§{E§15E>E :‘3 am? A REEEIE‘A‘E, EiEEmE ‘mi AAwEEAEz‘EEE‘AE‘: upmi «:1 1mm Aim: we; Eszmgsv-EEI E. ,zEEEEE. 13$» tta’mittttsttt m {2 £th Em: i‘égmt t‘égtte mm <2 ttzztutetti‘ egwt 33%? Mai §ét§tz§=éit§ Rate met the £394. tam; teat ..:§';tt::§ tilixtapré Date Date Date 0 Year 1 1 Year 2 2 $1 10% $1><(1.10)2=$1.21 With a two—year spot rate of 10 percent, investor in twolyear bond receives $1.21 at date 21 This is the same return as if investor received the spot rate of 8 percent over the first year and 12.1)4—9ercent return over the second year. $1 8% $1.08 12.04% S] X 1.08 X 1.1204 : $1.21 Because both the one—year spot rate and the two-year spot rate are known at date 0, the forward rate over the second year can be ca1culated at date 0. tittgtttttttttttttttt at the ‘ttttttt fétt‘tttttttt? Figure :"éAJ skewed em: at many pussitate tflktiitfitféhtpfi between the spa»! rate anti maturity. We Ittt‘w want t4: explore the retatimtsttip it: more tiettzit. We begin by defining; t: new term, the i‘m‘wzttti rate Next we relate this {Ot‘wm’il Hate it) future tttterest rates. 1431221113; we amt» sitter attenuate tttemies a? the term struetttm Defintiitm (if Farmyard Rate tittttiet it“: this; appendix. we ttevetuped a twuwyettt exert» pie where the ape: rate we? the first year is 8 petite: amt the spot tate {Witt the two years is 113 pesicetat Here, an itttttvétittzti investing 5&1 tit tatwmwyettrzettwettpmahen-:1 mutt? have iii X {tit}?! in awe years. Itt 01116? in ptttme mat discussant it is tt’tarthwhtte in remiss“ $1Xtt.1{}33:=$tkii,t)§t><132m m it titttmtimt {A}: teits w; setttethittg itnpmttttttt Zttttttti the ffiitttififlfiéitip hetttreett out» aim} twnu yfitt? rates, What am Enttivitttgai invests; tit ti twuwyettt Zfltttuwsttg‘mtt tuned yéeittitag tt} percent, his Wx’iiim} at the end at tmu yettts is the sum-e as it he received an té»pe:*t:et‘tt tetttm {wet the first year and a ififlktwpercettt ream: (wet the seeomt year, This taypmtttettmt rate (we: the 560 watt Wat: 12.04 pgfi’t’fiit it: cattett tittefimnmi rate. There, we ezttt think 0:" mt itsvestnt with it {thuyti’tii‘ mmwetmptm head E33; getting the Utii‘ifikfttt’ spat rate at” té Qfifi‘fim anti {ext’tiszg ft: tittt tx‘t‘fim‘tt tater the sewed year. the; t‘eittttmtship is; tategetatett it; Figure 8A2. More getteruflyt it we are given spot i‘Efii’ESt r3 amt :36 we tan aways tieiettttttte the the want tattixfgt stash that: (t tafmt t rizX‘ti at}: t‘tt’s We were {eff}. ytettttttg: it t :33 *1 1; M .w A» 11- § 3‘33”“; i' E. t 9‘] fit the Qt?’&«§f€3€if gem mm is 3? gettem amt {he tweuymr Spat rate is $2 patent: what is {2? we phtg in mat-latter: {ASL yietzfiéfig {mart ‘ ”22% 5“ ti}? ‘3 ”"2 fit gynmeat i». mm? m {3 i“; 1 4.28 when tuttzttitstg i». §t$¥§£3fittrf§i ttt‘tt’: tutu (tigita 13’? Camiéar an itsdividuafi érwesciag in a twawymr mmwzmzpan Emma; yéaitfirzg E2 mem say a ?$ 2% if his raaefives '3 percent mm we first 31%? and gimuémnemsfy Eczcks in E1213 wrwm mm» we: 5mm 0an year, Nam that Emir: the wzmmyemr 553m: mate anti the: awwwyaar 52th mm are kmwn at: éam {3, Bay amuse 15m farwaré raw és gaiwiamd frers'm the cmcammar am cwwyaar 5pm; mm; it: can Em: aafwiamai m, «192% 13 as math Mrward rams can be mfwfiamcj mm Eamr years as waiéfim genera? fist/mum ‘23 where F: 7255; the”: §mwar€i mm: (war aha nah year, #3, E3 the nwyear spa: mm and {,3 is she 5pm: ram fem" rs »»»»» E mam Assuma aha fmimwifig am, a? wuss: Yam firm; Raw I 5% 2 6 3 7 4 6 What; am the farmyard [meg my each a? m m» years? The fzarward ram aver the first yew Es, h)! definitiw, equaé m the oneayear 5pm, ramvas) we aim nm generafiy speak (:2? the fmrwzré ram war the first yeaflhe: fmwamf rams war the Eater wars are: E mm; x »» z 9,33% g 395% An individuai investing $E in the zwcwyear zemmmupmx band receives $1236 {$2 { W6}? a; dance 2, He flan be viewed as receiving the gamma“ spat rate :36 E pemem aver aha firm year and receiving the forward ram 0f 7,6)? percem aver the» seczzmj yeavzfim Enéivéduafi investing $2 %n a threewyear zemmcoupcm Mini receives M125”?! {$3 >< {5 £27)? at date By Shea car“: he view/m as; reaewmg the twwyaar 5pm ram 62? 6 peraem over ma firm (wen years; 21m} renewing me {award rate 0f 9Q} permnt we!” the third yeafiAn Endividuai mvestmg $2 m a, fwrmyezr zemwmpmn Emmi remeives $2625 [$l “/. {L06}? at: date: 4, fie can be vieweci as maeivmg the zhrxeewyear 5pm rate (2.? 7 percent aver the first three yeam and receiving the fmmanfi wire of 3136 percent over the faurth year: Hate that 3% (sf the {mgr spat: rams in this probfem are kmwn at date é}, gamma the farward rates are mlwfated {mm the span: mmsfimy can be cfeterm’med 3'; date: 0 as waif, The: mz‘zfierizfl in {mg z-xppemiix m Eiiwiy m be: diffiwi: {m a Silidfi‘m wpmmf m term 5mm» {are for the iim. firm; E}, Emigm m state: what fins Madam fimuh} 1%;th zizi {Ens pom? Given equatmns {AS} and 6 Ala}; 11 azudem Shank} be able m calctziam a, as: 0? inward ram: giwn 2:1, WE 01" 5pc.“ mtcg ’E’his‘ am} @13me he VitZ'Wfid (m a n’mchzmin mnmzzmtig’m, in aciditim’z m the: amimatmna 2-; student ahmkld umiaz‘réiami 1m immiiécm 0f Figure 5A2. We zmw mm in the mmmnsifip Ema/chm the fm'wzzrsi mist and the mpfimed 31,30: 1235365: in 1%? fixture, Estimating the Price ui‘a 80nd at a iiut’ure flare in fine exai‘itpie imam rim imdy mi” this « iiesgiter fie miisiriereti zei‘eea‘uumfi immis paying iii qiiiiii zfi iiiiiiili‘iify‘ and seiling 21% a siismtmi We; in maiuriiy. ii”): mm- fi;isii in change {he manuals: siigittlyu NUW; each imrfii initiaiiy seiis at par firs that gunmen: at maturity is abxwe is i emf Keeping the, fipfli rates :1: ii iie‘rl'titmi and iii percent we ifin e Date Date Date 0 Year 1 1 Year 2 2 i i , ! I Bond A $1,000 ——-—-- 8% -—--———— $1,080 Initial Payment purchase at price maturity Band B $1,000 10% $1,210 initial Payment purchase at price maturity One—year spot rate from date 1 to ——~— ‘? date 2 is unknown as of date 0. The payments 2:: m airings we ‘ M {iiiii and fisisfiiifi $05 1536-: me anti is“) tear Zé‘flwtiiiiipui} iwiui‘s‘ respected}: ‘iize iatiiizz i piii‘timSe‘ mice vi 351 ii iiiiiii in: ezaeia imnri is rieieiminexi as bi {300 “77'. i «iii iii 51:: We Z‘eiei‘i is; iii ‘ one yea; hand as; iwmi A and the? {ms-year imrfii as ham} 8 iiifiiifi ssiiii we mi: iiierentime yerii'sgmt rate whee eizfie i arrives/fies wiii be, {iaeqmizzfie imam daze 1 tr: time} A We eafi zais s0 {xiii it iiie spm irfie we? wzfi ’2 i‘iiis spm rate: is mi Mimezasuiriaieii. i’m mimic iéii‘iiiiitiii'k e r'iteui iiiiiriiiiiiisi‘wii’iiix‘fiiti’iifi Zil’iiitiiiit“ is {he sprii mie (we? year? Katmai; iiilseii in? iaigiL Siimiiti iiee rifie iii ifiiiziiwn faii beiweeu (iafie i.) and Lizzie is tire spa: £11133 (we? sea; :2 mmici iii€€iy he 1mm New iiiéii we have determined iiiéé pi‘iee a? semi: Mimi at {irate {is we was}: in {iflitfi‘i‘iiiii’lfi wififi {he price of read: Mimi “is/iii he at date i, ii e price 05' {he wee-war bend timed eii muse: be ‘éi iiéifi 211 uiaie i because iiie pgwi‘zierfi zfi li’léii’iiiii}" is; made {31651 The i’zzmi yam is eieiei‘w mining wififi fize price (if ii‘ae WW sea: Mud {head if} wiii be ai ti‘fifi iiu’ie; Seapgmse we fiifii iimt mt date is, rite iiiiewyem spot rate imm eizfie i {<5 rizfie 2 is (a gWiC‘e‘iii. We suite: I’iiiii :izis as iiiiii ne se‘ 51‘ semi mice my; year 3, “liaise means iiaafi i we iiive'fl gisiiiiii aieiate i amir use 53% {Kai} tfisi {Mix mm :fiei ate “ iiiee‘aiisterme yearizas iiii‘t’fiidfwf‘ pegged i’efi‘ i‘mmi 352 ii 5e istmri iizas waif; we yea: ieft, Became 1:901:13 B gays; % i 52%? ;fi :iefie 2s its: wine at time? i is; New 51m: tar: {me Mew fiiiemi (zi'iime iiie {irice ii‘fifi imifii if weuiei seii i‘m’ am date i2 i‘iewtise fin one knee: ii‘iat the meemyeaz‘ spear we ever yeai 2 Wi‘aiaiei be es esteem "i his“ (Range. in :«usi-giiiiptmm s‘impiéiies we garesenmém: but zines 3w, aim :ms (:5- w: {Hiiiai .s: 311m V”? fiWW WEW M flaw; a m: flaw E 5pm: Mm WW Yam“ 2 ’EE $!,2I0 LE4I. i=—— % , , $ 5 [.06 6/ $E,2EO Li 0.84=— 7% $ 3 E.07 / - $l,2|0 m4 $LOéE/EG I4% SEEnguxe {Em nnwymr :4;an mtg: Emgmnmg 23E. Emu: E EEEE’EmEE mm EEUE E0 Em E3 EECE’QTEEEE.,, E7113; Ea.) W E mmem EE‘ESECEEQE ’E‘EEEs mamm tEmE E WEEE Emc‘et EIEEEEEEE 21E, EEEEEf E amaE reaé‘iw ‘ééEEEE’E’EE (FEE ,EEEEEE ‘24 LEE?) 21E Elma ;, EEE EEEE:~; c2356, EEK? EzEEEEe HE Emmi H at, cEaEc E WE‘IEEEd Em Ex’EEEzEEEy, summw EEmE EEEc mne»~y€m $me E'EEEE: at, EEEEEsff E Emma! EEEEE E23: Ere, EE *EEEEEEE‘ E} pawn: my 7 percent, Em 1% {EEZE’EIEBEEE EEEfiEfl‘a/EE. ’E‘EEES E’E'EGZEEES EEEzEE E can EEE‘K’BSE SEE ECEEEEE 21E iEa‘tEt‘,‘ E amE m, E E, E cram? SEEEEEEEE ESEEEEEEE 1%.. EEEE‘EE 22E {Em 13, in this arms» EEK? x/zEEua EEE'EmE‘EEE H at daze WEEEEEEE EEC Em; E1: ’EEw 21mm: {EEMEE’EEG hand wives are mmesmml En "I”2EEEEE: 52E ’E‘E’Ee, firm,“ that EEEEEEE'E E? WEE] WEE Eur GEE dam? E is Em? Eamwn EEEEE’mc (Ezzie E gm the», mnmyc‘m‘ SEW we E’EE‘E’A'EEEIEEEg (war war 2, E5; nut, EEEEEEWE’E Emil EEe-‘zw E, E: E3; EEEEE’EEWEEEEEE Em EwmpE 3:12;: EEEEEEE EEEEEEEEEEgh EEK? Ehz’wm’d mm is Emwwn EEE, Jami EEE the am» yam 3pc}? rate haagmnmg at date, 1 is EEEEEEEEEEE’EE $me EEE‘ {Erma EEEM the prim 0E EmmE I? at date E Err; EEEEEEEEEEWEE ZEEEES‘EEEE EEE’ EEE'EE‘S’, pE’EUE’ Eu LEZEEt’f I, we «ram Emma m‘zEy 0E" EEm arzmum EEEEEE Exemé IE Efé 6277651052 in WEEE EOE“ Em EgEéxEEf E, WE: WE‘EEE EE’EES as” The AmmmE ’E‘EME Band E E3 E‘ixpected m SeE! Em“ cm ”5er E: EE is; wonhwhfie EEE;.EE<EE’Eg We) paints mm; E3'EE“>;E,, hecmm: azurEE EEMEEVEEELREE E2 (EEE‘EEn’mEEE EEEv: we» mated value: EE‘EmeEd if EEEE‘E'em Emma; EE’EEEEvEduaEEE E ,aEEES“? we: wEEE ‘w‘DC‘ZEEQ will Ermmmms éxpeutw mlm zmms invesmm 56mm}? cquaticm (AQE EEpE‘QfEKBEEES mm‘x Euraswb‘z mf EE’m prEw EEEEEE the: Emmi WEE] E76 SQEEEEEg, EEEE on «Ema? E E The Emacs»: Es. mmEa Mam} affirm” that Ea on EEzEEc? EEE w E v, ; é, . i “y , j é/ ; Mm », «3 5r 1 ,,W ’E E 9 WW 3 €3va z} Ehrc'rczm HE” EmmE 3%: [7mm an Ens/mun” cam EzEmmez am: HE Wm slralfigiazs; 31 date: EE: E, Buy 21unawwzubmui, EJE'EwgecaEg 2,12 EEaEe E WEEEEIEE be $5050 >33 $EVIEEEEE “2*: EEEEL .362 VEEEHLA EEE EEE‘N/a'wczr, 2»: $133!? EEKE‘: way mEzzm «W: m the Eth of :E‘z'a an l 48 ( Emma 0m déacimima a}? S’wrwaaxi mm»; we can remit-e M, 2 I} as; )x X‘ i ”’04 4 3 X "t 89431 mi; expflcigd (war year :3 {Rm‘zwnfimrr {mi 33434 percmi wag {ha furwzmi mm mm year 3; Maj} t 121M“? J [,3 214,36? what cumiiiixm wiii $115: remm from Stmwgy i aqua} {1m @xpecmd mum: frmn 3mm 5g}; 51‘? 12105116: wm‘éR» 13mm when mmziiiiuz’: wiii fwmmiz: 1A“ 11%) equal fwnnu'lzu Ali)? '{ha mu xirzaiegim \a’iil yieid the game, expescted {mum usury wives: 13213493; 8pm mte Mpecmi mar was" ’33 ‘2‘? M £22 Ufi’ifii‘ wank, if 112-? fm‘wzmi rate equalfa the smacked 5:90: with, (W? mmki emcee? 10 6am {hr Mimi? {Mum mm the, 111751 yawn wheiém‘ (ma 1‘ inveated m a {azmygar 300an m‘ 22 imagmi in 21 haw-yaw bond Mai Ssaid fififi‘? am: yam". "$75243 ééxgwfigfiémm éiygfifiéaméfi faggiiazéun {A $33 mew“ fairly i‘easa‘anui‘sia Tram 132 ii is; mawuaiwifi Sm: immwm mum} 3%: iz‘aim‘esi {mag in wash a way 21:31 me i‘k'aixwmfi mm WW 1:3 mind that spa miss, fixpecittfi by 13w murkeipiaze 3 year fmm 110W.W Fm mampim iiyaagim that iméividuais in 3138‘ inurifiziipiztw (in an: macaw Ehmxwaiwa MS} 1131a if we. fm‘wai'd mam f” 1%; i933) fl'ma m 8334:: wit: a» peciczi warm" >568! 2 ii‘zdimimeia mm}; m isza’mi i‘m‘ {ms gym? WUifid 31%;;ij im'jg a meywr Emmi Thai if»? mar wad sfimwe Sham {hat an imiivédiza! ém’mtmg in 22 “may m bumi bu? {flaming 3:1,} 363% a: we. and (a? was yam was/mi 1’X§3$£’{ in mm kegs; man if 33;? sizzaljaig‘ imagéu a azé'ae;~yg:az‘ ’mmd, {agitating {231,333 was; mm; fur flag gpeyfiic 15223:? wharf: {ha fwwzznfl mm was 22134? per» mm We can gemr'z‘disai thizz; m: Expecmfimis Hymihesis: 2;}? $112M raw mgmcwd mm year 2; E‘iaguafim {A 343-} $2in {hm the E‘kiarward mm mm the gamma year £3 53% m aha? spat rate: 11m pmg‘ait‘ amass: £43 pi’waii we: ma fliti‘fimi 3;er ”E‘i‘aég is»: cgiiiwd m6: {ixpewiwimw izygmfizmisz E! wastes magi izavatxzwez Wm m iizm‘agz {aim 53am“; Kim? my fuzwmfi wig: mm fizz: award 3322; is; 543%.qu as fire magma! wag): mm exma‘md mew“ {he Emma} yam: éiégéééfli‘éWfi‘i‘éfi‘fi‘fifiififi figgmiéémég A: m mama 21322223; iimifimtfi; tiééi‘aéa ma: zxgmziima {av 24} was; 3mm i'iuwm'en (mi? 33:31, we aiayeiugm‘d {A M) by . Sgizmmg i‘im’a immmrs wex‘a {isekwwmmL Suppnsga aiiemzfliveifi ma: immim‘fi; gm: awry? in {£532 ”(ii -‘ w W 4" via irxiix :i will haw géié'fzmrzaé a?» r '45 1.5533; mm 232% m 333 W "13 n z s, Sum/amt iitzzmsziafi Nmmm: :miéy 4?: Va? away-2mm ezmiénimfi. Tim 1% 22k: vz<mt£ 42:! “My“ wage! as» a ai'hukt. {Egagrzéw Es Sims (a: mfim Bimmh Niki ‘smz i157 Eu“ Wiségé} Szgvaksgg mafia} 219963? mum E’fi‘iky far 21;: individuak Mm 3,2123%; m mws: m; ems 36:21“? E‘ 12mm in a»; nmyaaz‘ Emmi 32‘ hwmé m :: EWeby’éfi‘ Emmi Ema 39E} at khe cmi uf mm was: fiéméegy {E} has; Em risk §W€szééfif 31w: imagmz“ krzuws $24 that was Hf ream“; maxi he: : é‘ém» wrwiyz gtx‘zitegy { What»; much :‘égk; ma é’mzi} E‘é‘iuffi ix aiepmdam em what Egagxpmm in émz‘z‘wé mm, i§€mme€ simwg}; am 31333 mare flair; {Em} seimmgy Q; m; risakwm «am: im mam WEE eimma xérztté‘gy {if} if‘mnh stiztisgim have 2%}: mm: {txgwcmi 21:22.31; Risk «gm/same imam” mm Ram's m} pz‘fifm'mce {02° we mategy away {he 061:5? éméy when me. fixgfii‘afié‘i‘f Mum m; atmmgfiy in} Eta {shww me: zemm an satrz‘ztéegy i 1 EV E’éwmzss mi”: aw Sémicgw MW 33:? same? expeazmi wtmz’: Wham]; eagamEs {the 3pm mu: agmcwd (war yam 2‘, snmcgy {H‘s am ”My Ema/s? a higkmr mic: Us? mum: whey ljquidityPreference Hypathesis: j; > 5pm mm axpa‘smcci may yea? 2 M 2 “i5 Tim: :3 in ”flier m induce inwaim‘x In my} ms :‘iakiey iwuymr mm the E‘ikz‘if‘é‘si‘i 8&5; me 50? ’m‘d rate may the sizwm’i year m E76 22mm: 232:: :9an mix? mpecéed we; we Swami yaks: E/icgzxztiism mm is cailmi me Ziafiliriim‘gmykmg:v Exygmtéwfia‘ We: dewinmcfi aha: emiw ziiguzmiam by gismmmg {Em imiixédmés are gfizmnéng m Emmi may amt: yam We? gmétfiefd 02:: that in? Einsse tygws; a? ineih‘ie‘inzfim a 3m)» yam? Emmi has; mm: risk because“ 1': {mm he wki prmmmmiy, What abam mam: émfixidizgtfa Mm wam m Emmi $1:er yama‘? iWw c118 thew. gmnpie ém-‘vsmrs mm 2: EWiP~§’i§ZiE‘ :imv imrimnf‘: Téxey mum choose mm a? {ha f‘oSEnwmg sirzitcgiex: EEE "Buy 22 iwcwmr wrzwmkpem Emmi E\ Elm}: g1mewymz‘immi Wham the Emmi mafim‘ex émmééiaidjv hm simmer um?» 3293: mm, Sii‘zfiegy ME) E1215 rm risk fur am Ema-Ma)? mm a: maymy 232m? hm‘ézwm Max:356 ms: pm aemig m be I’v-aeivezd at dais: 2 2m: kmwm as a}? Mix“ 0? Homwm; maifgy {W § Ms M mm: the: 3pm mm aver year 2 is unimwwn 3% date 8, 51 mm he sham; that r‘§sl¢-;‘m%ss:—: égzxmmr wiEE yrefm wither simicgy {Hi} my Wategy {W} mar E2113 Uihé‘z' when i}, Spat mu: expc‘cied may year 3 «A m; Nun: that the assmt‘zpiiem at“ mg: marsim gix‘eg azemtmry gfii‘aziimmm E-{Nziémmhip e’ Aifi} hams fur a market dmnmaied by inwamm with a nnewymz‘ aims Ermimza Reéuziamw gm}: (AW) hukds fur a market: domirmiad by im‘esmm mm 2: Maya}? time Eam‘énm Eiinancém eczmnmim haw gezzemfiy argued £5232 the mm? bm'ézzm of ma Eypisszii érza‘esmz' Ex gmlemliy much xhcmer than the maturity at" typéuzfl bxmdw in {Em nlzxrksflpiace‘. Thaw wm‘mumm View (Ali) we the best depmmn nf muifiimum m the Emmi EIEQE‘EXC? WEE: risk» (swam? im'egzm‘s, Einwavmx du W6 have :1 mafia: uf rifiwnsxstrai my riskgwws ém’estzm‘? in mm? mum: can the? sixpecmicms; hygwhexés a? equmiun (A H; or the Eéggziicfiijy«prvf’crezm hypmizeaés nf mummy: {A E5) be: expmfied m hows? At; we wifii E...
View Full Document

{[ snackBarMessage ]}