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68 Cards in this Set
- Front
- Back
nominal interest-inflation interest equals what
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real interest rate
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if inflation is 8 percent then then breakeven interest rate would be?? and if you get 10 percent then??
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interest rate would be 8 percent, if you get 10 percent you are ahead 2 percent
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what is wealth
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total resources owned by an indivudial, including assets
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what is expected return
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return expected over the next period
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what is risk
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degree of uncertainty associated with the return
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what is liquidity
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the easy and speed with which an asset can be turned into cash
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LIQUID PREFERENCE FRAMEWORK WAS DEVELOPED BY
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JOHN MAYNARD KEYNES
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interest rate can be views as??
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the price one has to pay in order to get someone to willingly forego the advantages of liquidity
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what is equilibrium interest rate
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determined by the supply and demand for the money
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keyned assumed that..
1. money has a ... 2. money has a 0 rate of.. 3. central bank controls... 4. as interested rates incrase, the opportunity cost of holding money increases because of... 5. at low or high interest rate ther eis a greater probablity of a ... |
1. zero rate of return
2. return 3. the amount of money 4. the opportunity cost of holding money increases ( foreone interest) 5. capital oss |
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at an interest rate above the equilibrium rate there is an excess supsply of money and people will try
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buy bonds driving bond prices up and interest rates down
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at an interest rate belowthe equilibrium rate, there is an excess demand for money and people will try to..
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sell bonds, driving bond prices down, and interest reates up
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as income increases demand for money and equilibrium interest rates...
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increases, increase
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price increases demand for money, equilibrium interest rates
-both cause the transaction demand for money to |
increases, increase, increase
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money supply increases equilibrium interest rates...
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decrease
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a countinous increase in the Ms could lead to higher interest rates by...as long as its not a steady increase in money supply Ms should be...
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raising inflation..okay
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defualts in the subprime mortgages meant
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borrowers with weak credit records
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bank panic is...
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when multiple banks fail simultaneously
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ina panic, depostors fearing for the safety of their deposits not knowing the quality of banks loan portfolis withdraw their deposits to the point that..
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banks fail
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resulting decrease in the supply of funds available to to borrows leads to higher....
and further declines in lending and... |
interest rates, economic activity
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ability to bund these high-risk mortgages in a standardized debt security is called
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mortgage-backed securities
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blank.. provided a new source of financing for these high-risk mortgages
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mortgage backed securities
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development of subprime morgages helped raise us homeownership to..
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highest levels in us history
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when housing prices bvegan to fall in 07 to levels below the amount of the mortgage there was an incentive to..
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walk away from their homes
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to promote recovery act the subprime financial crisis of the economic recovery act authorized the treasury to spend 700 billion to purchase subprime mortgaeges assets this was called..
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tarp
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banks balance sheet is
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total assets equals total liabilities plus capital
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chedckable deposits is currently what percent of banks liabilities
reason is .. |
6.. more substitutions available
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non transaction deposits are what percent of bank liabilities
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53 percent
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interest paid on checkable and non transaction deposits account for what percent of total bank operating expense.. and cost of servicing accounds ( salaries, building rent) are what percent of operating expenses
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25.. 50
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discount rate is what percent
fed funds rate is what percent |
1/2, 1/4
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federal reserve is
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discount loans
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bank capital is what.. and what equation
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equity, assets minus liabilities
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reserves have what interest rate
reserves are held to meet resrve requirements set by |
no interest, the fed
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loans are what percent of banks assets and what percent of bank revenues are loans
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61, 50
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savings banks are...
credit unions are.. |
residential mortgages, consumer loans
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what was created to help pay for the war.. too many were issued which made the what weak
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continentals, continental
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who was a key player of bank of the US
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treasury secretary alexander hamilton
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in 1791 congress issued a
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20 year charter
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when bank charter expired in 1811 bank of the us was not renewed becasue of
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distrust of centralized power
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in 1816 congress issued a blank charter of second banko f the us but was not blank.. after the 20 years
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20 year charter, renewed
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before 1863 it was all blank banks ( natoinal banking act of 1863) it was supervised by
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state, the office of the comptroller of the curency
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banking panic of 1907 resulted in the blank.. which president created it..
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federal reserve act of 1930.. woodrow wilson
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adjustable mortgage increases risk for blank..and decreases risk for..
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borrower, lender
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blank was the first nationwide credit cardd
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diners club
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balance sheet can be best stated by
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total assests-total liabilities= equity
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sum of vault cash and bank deposits with the fed minus required reserves is called
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excess reserves
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nominal interest rate is
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equal to the real interest rate plus inflation rate
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the discount rate is
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the rate which the fed charges on its loans to depository institutions
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if prices in the market for fine art becomes more volatile then
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demand curve for money shifts to the right and the interest rate rises
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more risky
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volatile
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long term capital gains are, currently taxed at a rate
-below -above -equal to -depending on your income it can vary |
below
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using keynesian model. if income increases than the demand for money will..
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the demand for money will increase
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before 1980, when the market interest rate rose above the maximum rate set by q..banks...
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lost deposits
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3 examples of assets
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us. treasury securities
reserves commercial lones |
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in the money market when the interest rate is below equilibriu interest rate there is an excess of money, what happens..
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people will try to sell bonds
interest rates will rise |
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what benefits homeowners when interest rates are falling
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adjustable rate mortgages
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what are long term debt securities from less well known corporations with lower credit ratings
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junk bonds
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who was the junk bond king
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drexel burnham
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what is short term debt securitiy issued by large banks and corporations
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commercial paper
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commercial papers totals what money total right now
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2.6 trillion
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to avoid the reserve requirements on transaction depots, any balances above a certain amount in a corporations checking account at the end of a busines day are "swept out" of the account and invested in overnight securities that pay the corporation interest..what is this called
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sweep account
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state banks that aren't members of the fed have what insurance
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FDIC
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lender provides the borrower with an amount of funds, which must be repaid to lender at the maturity date along with an additional payment for the interest
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simple loan
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lender provides the borrower with an amount of funds, which must be repaid by making the same payment every period, consisting of part of the principal and interest
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fixed payment loan
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pays the owner of the bond a fixed interest payment every year until the maturity date, when a specified final amount is repaid.. example would be a what
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coupon bond. treasury bond
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bought at a price below its face value ( at a discount) and the face value is repaid at the maturity date
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discount bond
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interest rate that equates the present value of payments received from a debt instrument with its value today
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ytm
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a long term security has greater interest-rate risk and therefore would have a higher what
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interest rate
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