10-1-09 - -Liquidity Premium Theory a Premium to liquidity...

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171A 10/1/2009 CH3 Bond prices If people are less willing to borrow $ - Supply curve shifts left If banks are less willing to lend $ - Demand curve shifts to left CH5 Term structure - Keep riskiness (+every thing else) about the same, except maturity - Forward rates – rates of the future - Spot rates – now - Market segmentation a. Bonds of different maturities are not substitutes
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Unformatted text preview: -Liquidity Premium Theory a. Premium to liquidity shorten term bonds-Risk structure Expectations model of interest rate determination CH7 The Federal Reserve System (FED)-Central Bank-2 issue: fear of centralization of power and sovereignty of state-...
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