present value yield to maturity total returnecon.ucsb.edu/~bohn/135/slides04.pdf · [notes on...
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[Mishkin ch.5 - P.1]
Demand and Supply for Financial Assets Mishkin ch.5: The Bond Market
- - -
1.
2. –
3. => DEFER
[Mishkin ch.5 - P.2]
Perspective #1: Bonds as Financial Assets
- 1. Expected return (+) 2. Risk (-) 3. Liquidity (+) -
[Mishkin ch.5 - P.3]
all
relative - negatively related relative
relative relative - positive related
- - Re-valuation new
- New savings - . - => Real
- -
[Mishkin ch.5 - P.4]
The Supply of Bonds
defines - -
- - - - - => Real
. =>
–
[Mishkin ch.5 - P.5]
Demand & Supply => Equilibrium Price and Volume - h
[Mishkin ch.5 - P.6]
Application: Demand for other financial assets
Same basic argument as for bonds: -
provided
-
Additional issue for equity-type assets: future payments are uncertain
- -
[Mishkin ch.5 - P.7]
Application: The “Flight to Quality”
relative
- – -
Demand
Stocks
PriceSupply
Stock Market
Demand
Bonds
PriceSupply
Bond Market
–
[Mishkin ch.5 - P.8]
Related Perspectives
- - - - - -
Asset Pricing – - -
[Mishkin ch.5 - P.9]
Systematic Analysis: Predict the Effect of hanges
-
-
- -
[Mishkin ch.5 - P. ]
Overview #1:
Demand
[Mishkin ch.5 - P.11]
Overview #2:
Supply
[Mishkin ch.5 - P.12]
[Caution: Distinguish real and financial investments!]
[Mishkin ch.5 - P.13]
Scenario: Increase in Expected Inflation
s
Fisher effect)
Δi = Δπ e
π e
Δi ≠ Δπ e]
[Mishkin ch.5 - P.14]
Preview: More Applications of Financial Markets Analysis
1. The Risk-structure of interest rates - - Y
2. The Term Structure of interest rates - – DEFER.
3. Demand & Supply in the stock market – DEFER.
4. The Market for Foreign Exchange - - - .S
D