Term
| interest rates observed in financial markets |
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Definition
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| When central bank sets ___ interest rates, lender PAYS borrower |
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Definition
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Term
| A theory of interest rate determination that views equilibrium interest rates in financial markets as a result of the supply of and demand for loanable funds |
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Term
| describe funds provided to the financial markets by net suppliers of funds |
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Definition
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Term
| QUANTITY OF LOANABLE FUNDS SUPPLIED INCREASES AS INTEREST RATE ______ |
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Definition
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Term
| total net demand for funds by fund users |
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Definition
| demand for loanable funds |
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Term
| MORE funds are DEMANDED if interest rate ______ |
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Definition
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Term
| cumulative sum of past deficits |
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Definition
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Term
| sum of the quantity supplied by the separate fund supplying sectors (POSITIVELY RELATED TO INTEREST RATES) |
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Definition
| agreggate supply of loanble funds |
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Term
| sum of quantity demanded by the separate fund demanding sectors (INVERSELY RELATED TO INTEREST RATES) |
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Definition
| aggregate demand of loanable funds |
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Term
| When interest rates is higher than equilibrium rate, the financial system has a SURPLUS of loanable funds so what will they do with the interest rate |
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Definition
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Term
| when rate of interest is lower than equilibrium rate, there is a SHORTAGE of loanable funds so ilang ____ ang interest rates |
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Definition
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Term
| occurs when the quantity of a financial security supplied or demanded changes at every given interest rate in response to a change in another factor besides the ineterest rate. |
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Definition
| shift in supply or demand curve |
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
INTEREST RATE |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
total wealth |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
risk of financial security |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
near term spending needs |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
monetary expansion |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (supply)
economic conditions |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (demand)
interest rate |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (demand)
utility derived from asset purchased with borrowed funds |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (demand)
restrictiveness of nonprice conditions |
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Definition
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Term
WHAT IS THE IMPACT ON EQUILIBRIUM INTEREST RATE? (demand)
economic conditions |
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Definition
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Term
| the continual increase in the price level of a basekt of goods and services |
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Definition
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Term
| nominal risk-free rate that would exist on a security if NO INFLATION were expected |
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Definition
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Term
| risk that a security issuer will default on the security by MISSING AN INTEREST OR PRINCIPAL PAYMENT |
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Definition
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Term
| risk that a security CANNOT BE SOLD at a PREDICTIBLE PRICE with low transaction costs at short notice |
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Definition
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Term
| provisions that impact the security holder beneficially or adversely and as such are reflected in the interest rates on securities that contain such provisions |
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Definition
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Term
| length of time a security has until maturity |
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Definition
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Term
| the percentage increase in the price of a standardized basket of goods and services over a given period of time |
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Definition
| inflation of the general proce index of goods |
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Term
| The HIGHER the inflation, the ___ the interest rate |
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Definition
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Term
| Percentage change in the buying power of a dollar |
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Definition
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Term
| It measures society’s relative preference for consuming today rather than tomorrow |
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Definition
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Term
| The HIGHER society’s preference to consume today, the ___ THE REAL RISK-FREE RATE WILL BE kay mas higher ang time value of money |
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Definition
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Term
| The relationship among real risk-free rate (RFR), expected inflation rate [E(IP)] and nominal interest rate (i) |
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Definition
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Term
| Theorizes that nominal risk-free rates observed in financial markets must compensate investors for any reduced purchasing power on funds lent due to inflationary price changes and an additional premium above the expected rate of inflation for forgoing present consumption |
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Definition
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Term
| Nominal risk-free rate will be EQUAL to the real risk-free rate ONLY when market participants expect INFLATION rate to be ___ |
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Definition
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Term
| The higher the default risk, the ___ the interest rate that will be demanded by the buyer |
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Definition
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Term
| quoted interest rate on a security MINUS treasure security with similar maturity, liquidity, tax, and other features |
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Definition
| default or credit risk premium |
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Term
| If a security is ILLIQUID, investors will add a ___ to the interest rate on the security that reflects its relative liquidity |
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Definition
| LIQUIDITY RISK PREMIUM (LRP) |
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Term
| Special provisions that provide benefits to the security HOLDER are associated with __ interest rates |
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Definition
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Term
| Special provisions that provide benefits to the security ISSUER are associated with __ interest rates. |
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Definition
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Term
| Compares interest rates on securities, assuming all characteristics EXCEPT MATURITY are the same |
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Definition
| Term structure of interest rates or YIELD CURVE |
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Term
| change in required interest rates as the maturity of a security changes; can be positive or negative or zero |
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Definition
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Term
SHAPE
yield rises with maturity |
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Definition
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Term
SHAPE
ields decline as maturity increases
Inverted do not last long and is a sign of an impending economic downturn |
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Definition
| inverted or downward sloping |
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Term
shape
yield is unaffected by term to maturity |
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Definition
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Term
| yield curve reflects the market’s current expectations of future short-term rates. The return for a 4 yr bond to maturity should EQUAL the expected return for investing in 4 successive one-year bonds |
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Definition
| unbiased expectations theory |
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Term
| long-term rates are EQUAL to geometric averages of current and expected short-term rates PLUS LIQUIDITY RISK PREMIUMS that INCREASE with security’s maturity. |
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Definition
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Term
| Based on the idea that investors will hold long term securities only if they are offered a premium |
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Definition
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Term
| The yield curve will be __ because liquidity premiums increase as maturity increases |
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Definition
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Term
| assumes that investors do not consider securities with different maturities as perfect substitutes. Individual investors have PREFERRED horizons dictated by the nature of liabilities they hold so interest rates are determined by distinct supply and demand conditions within a particular maturity segment |
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Definition
| market segmentation theory |
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Term
| Assumes that investors or borrowers are generally unwilling to shift from 1 maturityy sector without adequate compensation in the form of an INTEREST RATE PREMIUM |
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Definition
| market segmentation theory |
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Term
| Supply of short DECREASES and supply of long INCREASES - slope of curve becomes ______ |
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Definition
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Term
| Supply of short increases, supply of long term decreases - _________ slope |
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Definition
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Term
| An expected rate (quoted today) on a security that originates at some point in the future |
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Definition
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Term
| The notion that a dollar received today is worth more than a dollar received in the future date |
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Definition
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Term
| a single cash flow occurring at the beginning and end of the investment horizon with no other cash flows exchanged |
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Definition
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Term
| series of equal cash flows received at FIXED intervals over the entire investment horizon; constant payment received at EQUAL intervals |
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Definition
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Term
| onverts cash flows received over a future investment horizon into an equivalent (present) value as if they were received at the beginning of the current investment period. |
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Definition
| present value of a lump sum |
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Term
| Present value of an investment is the __ value |
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Definition
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Term
| ___ ANG RELATIONSHIP SA PV UG INTEREST RATE |
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Definition
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Term
| cash flow received at the beginning is translated to a terminal value at the end of the investment horizon |
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Definition
| future value of a lump sum |
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Term
| ___ ANG RELATIONSHIP SA FV UG INETREST RATE |
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Definition
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Term
| converts a finite series of constant cash flows received on the last day of equal intervals throughout the investment horizon into an equivalent present value as if they were received at the beginning of the investment |
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Definition
| present value of an annuity |
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Term
| converts a series of equal cash flows received at equal intervals throughout the investment horizon into an equivalent future amount at the end of the investment horizon |
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Definition
| future value of an annuity |
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