金融市场学双语课件CPowerpoint Slides
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institutions
Loanable Funds Theory of Interest Rate Determination
n Theory of how the general level of interest rates are determined
n Explains how economic and other factors influence interest rate changes
u Businesses choose projects by calculating the project’s Net Present Value
Demand for Loanable Funds
n Sum of sector demand (quantity) at varying levels of interest rates
n Sector cash receipts in period less than outlays = borrower
n Quantity demanded inversely related to interest rates
n Variables other than interest rate changes cause shift in demand curve
Demand for Loanable Funds
n Interest rates determined by demand and supply for loanable funds
Loanable Funds Theory, cont.
n Demand = borrowers, issuers of securities, deficit spending unit
Interest Rate
Quantity of Loanable Funds
Loanable Funds Theory
Household Demand for Loanable Funds
l Households demand loanable funds to finance housing, automobiles, household items
l These purchases result in installment debt. Installment debt increases with the level of income
l There is an inverse relationship between the interest rate and the quantity of loanable funds demanded
n Interest rate changes affect the values of all securities
l Security prices vary inversely with interest rates l Varying interest rates impact retirement funds and retirement
2
Determination of Interest Rates
Chapter Objectives
n Explain Loanable Funds Theory of Interest Rate Determination
n Identify Major Factors Affecting the Level of Interest Rates
Loanable Funds Theory
Business Demand for Loanable Funds
l Businesses demand loanable funds to invest in assets
l Quantity of funds demanded depends on how many projects to be implemented
income
n Interest rates changes impact the value of financial institutions
l Managers of financial institutions closely monitor rates l Interest rate risk is a major risk impacting financial
n Explain How to Forecast Interest Rates
Relevance of Interest Rate Movements
n Changes in interest rates impact the real economy
l Investment spending l Interest sensitive consumer spending such as housing
n Supply =百度文库lenders, financial investors, buyers of securities, surplus spending unit
n Assume economy divided into sectors n Slope of demand/supply curves related to
elasticity or sensitivity of interest rates
Sectors of the Economy
n Household Sector--Usually a net supplier of loanable funds
n Business Sector—Usually a net demander in growth periods
n Government Sectors
l States—Borrow for capital projects l Federal—Borrow for capital projects and deficit
spending
n Foreign Sectors—Net supplier since early 1980’s
Loanable Funds Theory of Interest Rate Determination
n Theory of how the general level of interest rates are determined
n Explains how economic and other factors influence interest rate changes
u Businesses choose projects by calculating the project’s Net Present Value
Demand for Loanable Funds
n Sum of sector demand (quantity) at varying levels of interest rates
n Sector cash receipts in period less than outlays = borrower
n Quantity demanded inversely related to interest rates
n Variables other than interest rate changes cause shift in demand curve
Demand for Loanable Funds
n Interest rates determined by demand and supply for loanable funds
Loanable Funds Theory, cont.
n Demand = borrowers, issuers of securities, deficit spending unit
Interest Rate
Quantity of Loanable Funds
Loanable Funds Theory
Household Demand for Loanable Funds
l Households demand loanable funds to finance housing, automobiles, household items
l These purchases result in installment debt. Installment debt increases with the level of income
l There is an inverse relationship between the interest rate and the quantity of loanable funds demanded
n Interest rate changes affect the values of all securities
l Security prices vary inversely with interest rates l Varying interest rates impact retirement funds and retirement
2
Determination of Interest Rates
Chapter Objectives
n Explain Loanable Funds Theory of Interest Rate Determination
n Identify Major Factors Affecting the Level of Interest Rates
Loanable Funds Theory
Business Demand for Loanable Funds
l Businesses demand loanable funds to invest in assets
l Quantity of funds demanded depends on how many projects to be implemented
income
n Interest rates changes impact the value of financial institutions
l Managers of financial institutions closely monitor rates l Interest rate risk is a major risk impacting financial
n Explain How to Forecast Interest Rates
Relevance of Interest Rate Movements
n Changes in interest rates impact the real economy
l Investment spending l Interest sensitive consumer spending such as housing
n Supply =百度文库lenders, financial investors, buyers of securities, surplus spending unit
n Assume economy divided into sectors n Slope of demand/supply curves related to
elasticity or sensitivity of interest rates
Sectors of the Economy
n Household Sector--Usually a net supplier of loanable funds
n Business Sector—Usually a net demander in growth periods
n Government Sectors
l States—Borrow for capital projects l Federal—Borrow for capital projects and deficit
spending
n Foreign Sectors—Net supplier since early 1980’s