ECON 304 Study Guide - Final Guide: Overnight Rate, Nominal Rigidity, Yield Curve
16 Mar 2013
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Topics: (1) the real economy (2) what is money? (3) introduction to interest rates (4) Debt and equity (10) asymmetric information problems (11) financial intermediation (12) Banking and leverage (13) hedging and derivatives & (14) current events. Money helps keep track because the only way to get money is to have already produced & sold goods. Debt instrument: device by which you can borrow some money now, and pay some money back in future. General formula for simple interest, where i is interest rate and n is number of years: Cf (1+i)n , where pv = present value and cf = cash flow. Interest rate on bonds at different maturities move together. Yield curve plot of interest rates of similar bonds of different maturities - > describe term structure of rates. Measure of interest rate. For simple loan, yym = simple interest rate (i) When p = face value of bond i (ytm) = coupon rate.
