Slides Brigham and Houston Interest Rates参考.ppt

* * * * * * * * * * * * * * ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. Interest Rates Cost of Money and Interest Rate Levels Determinants of Interest Rates The Term Structure and Yield Curves Using Yield Curves to Estimate Future Interest Rates Chapter 6 6-* What four factors affect the level of interest rates? Production opportunities Time preferences for consumption Risk Expected inflation 6-* “Nominal” vs. “Real” Rates r = represents any nominal rate r* = represents the “real” risk-free rate of interest. Like a T-bill rate, if there was no inflation. Typically ranges from 1% to 5% per year. rRF = represents the rate of interest on Treasury securities. 6-* Determinants of Interest Rates r = r* + IP + DRP + LP + MRP r = required return on a debt security r* = real risk-free rate of interest IP = inflation premium DRP = default risk premium LP = liquidity premium MRP = maturity risk premium 6-* Premiums Added to r* for Different Types of Debt IP MRP DRP LP S-T Treasury ? L-T Treasury ? ? S-T Corporate ? ? ? L-T Corporate ? ? ? ? 6-* Yield Curve and the Term Structure of Interest Rates Term structure: relationship between interest rates (or yields) and maturities. The yield curve is a graph of the term structure. The May 2011 Treasury yield curve is shown at the right. 6-* Yield Curve for May 2011 Constructing the Yield Curve: Inflation 6-* Step 1: Find the average expected inflation rate over Years 1 to N: Constructing the Yield Curve: Inflation Assume inflation is expected to be 5% next year, 6% the following year, and 8% thereafter.