Lec3 - Finance 101: Monetary Economics & the Global...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Finance 101: Monetary Economics & the Global Economy Lecture 3 Asset prices and economic news Prof. Hnatkovska Fall 2011
Background image of page 1

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

View Full DocumentRight Arrow Icon
FNCE 101– Hnatkovska – Lecture 3 2 Outline Bond prices and interest rates Stock prices Inflation and rates of return Do bond and stock prices predict economic activity? Financial market response to economic news
Background image of page 2
FNCE 101– Hnatkovska – Lecture 3 3 Reading Siegel, chapters 14 and 10 (in coursepack on study.net)
Background image of page 3

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

View Full DocumentRight Arrow Icon
FNCE 101– Hnatkovska – Lecture 3 Practice problems See problem set #1
Background image of page 4
FNCE 101– Hnatkovska – Lecture 3 Financial markets and economic news Employment Report Release Friday July 5, 1996 The news Payroll employment up 239,000 Unemployment at a 6 year low of 5.3% Wages up 9 cents an hour, largest rise in 30 years 5
Background image of page 5

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

View Full DocumentRight Arrow Icon
FNCE 101– Hnatkovska – Lecture 3 Market reaction to employment report 6 => How should we understand these market reactions?
Background image of page 6
FNCE 101– Hnatkovska – Lecture 3 Bonds Bonds are a special type of a loan Buying a bond is equivalent to lending money • Bank deposits are another type of loan Bond payments are usually predetermined • Amount of the debt – the “principal” or the “face value” • Periodic interest payments – the “coupons” • Length of the loan – the “maturity” Bonds are tradable loans Can be transferred (traded) to other investors Transferable loans are said to be “securitized” 7
Background image of page 7

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

View Full DocumentRight Arrow Icon
FNCE 101– Hnatkovska – Lecture 3 Types of bonds Coupon bond - pays the owner a fixed interest payment ( coupon payment ) every year until the maturity date, when a specified final amount ( face value or par value ) is repaid. Coupon bond is identified by 3 pieces: Corporation or government agency issuing the bond Maturity date of the bond Coupon rate = coupon payment/face value Treasury bonds and notes, and corporate bonds Discount bond (zero-coupon bond) – is bought at a price below its face value (at a discount), and the face value is repaid at the maturity date. Does not pay make any interest rate payments US T-bills, US savings bonds, and long-term zero coupon bonds
Background image of page 8
FNCE 101– Hnatkovska – Lecture 3 Major types of bond issues Treasury: issued by the U.S. government The largest, most active and the reference market for bonds The focus of most of our class Federal: issued by Federal agencies Fannie Mae, Freddy Mac Municipal: issued by state and local government Usually tax free Corporate: issued by major corporations 9
Background image of page 9

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

View Full DocumentRight Arrow Icon
FNCE 101– Hnatkovska – Lecture 3 U.S. Treasury issues Treasury bills (par $10,000) Maturities of 1 year or less Treasury notes (par $1,000) Maturities between 2, 5 and 10 years Treasury bonds (par $1,000) 30 year TIPS (Treasury Inflation Protected Securities) Treasuries issues where the coupons and principal rises with inflation 10
Background image of page 10
FNCE 101– Hnatkovska – Lecture 3 Present value How to measure interest rates on the different types of financial
Background image of page 11

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

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/26/2011 for the course ASDF 2342 taught by Professor 2adga during the Spring '11 term at Mansfield University of Pennsylvania.

Page1 / 41

Lec3 - Finance 101: Monetary Economics & the Global...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online