英语金融复习

Part 1 Chapter 1 Economics is concerned with the following processes: 1. How scarce resources are allocated in the production process among competing uses. 2. How income generated in the production and sale of goods and services is distributed among members of society. 3. How people allocate their income through spending, saving, borrowing and lending decisions. Saving: Income that is not spent on consumption is called saving. Direct Finance: Net lenders lend their funds directly to net borrowers. Indirect Finance: Financial intermediaries serve as go-betweens to link up net lenders and net borrowers. The difference between direct and indirect finance is the financial intermediaries. 参考P19 13题 Business Cycle: In economics those short-run fluctuations of the economy are part of what is appropriately the business cycle. Why do financial intermediaries exist? What services do they provide to the public Are all financial institutions financial intermediaries? Financial intermediaries exist because they help to minimize the transactions costs associated with borrowing and lending. The financial services provided include appraising and diversifying risk, offering a menu of financial claims that are relatively safe and liquid, and pooling funds from individual net lenders. No, not all the financial institutions financial intermediaries, but the most important one is the financial intermediary. Chapter 2 Barter 实物交换、易货: Trading goods for goods. Double Coincidence of Wants: the situation when the grocer has what you want and you have what she wants. Monetary Aggregates: Data the Fed publishes on several different monetary measures. M1: It consists of currency held by the public and checkable deposits. M2: Besides M1, it consists of small time deposits, passbook savings deposits and individual money market mutual funds. (It includes everything in M1 plus other highly liquid assets.) M3: It includes everything in M2 plus some less-liquid assets. Large time deposits. Demand Deposits: Non-interest-earning checking accounts issued by banks Checkable Deposits: Deposits that can be withdrawn by writing a check to a third party. 6. Why does the Fed have so many monetary measures? Which monetary aggregate is the most closely associated with transactions balances? Because measuring money is not easy. What functions as money will change over time as an economy’s financial system evolves, and some financial claims may be difficult to classify. M1 is most closely associated. Chapter 3 Interest Rate: The cost to borrowers of obtaining money and the return on money to lenders. Quantity Demanded of Money: The specific amount of money that spending units wish to hold at a specific interest rate.货币需求量 Demand for Money: The entire set of interest rate-quantity demanded combinations-the entire downward sloping demand curve. Supply of Money: M1, the currency in the hands of the public plus checkable deposits. Quantity Supplied of Money: The specific amount that will be supplied at a specific interest rate. Credit: The flow of money from net lenders or financial intermediaries to net borrowers in a given time period. Credit comes from the following three sources: 1. Changes in credit extension by depository institutions 2. Changes in lending at nondepository financial institutions and other nonfinancial institutions. 3. In addition to domestic sources, credit flows can come from abroad. Chapter 4 The classification of financial markets: Money market: The money market includes those markets where securities with original maturities of more than one year are traded. Capital market: It includes those markets where securities with original maturities of more than one year are traded. Municipals: Long-term instruments issued by state and local governments to finance expenditures on schools, roads, college dorms and the like. 4 Discuss the major function of market markers in securities markets. What is the difference between a broker and a dealer? The market makers function as coordinators who link up buyers and sellers of financial instruments. They serve three important functions: 1. they disseminate information about market conditions to buyers and sellers; 2. they connect the various markets by buying and selling in the market themselves; 3. they provide financial services that determine the quality of primary and secondary markets. A broker simply arranges trades between buyers and sellers. A dealer, in addition to arranging trades between buyers and sellers, stands ready to be a principal in a transaction. Part 2 Financial Principles Chapter 5 Compounding: A method to measure the future value of money lent today. Discount from Par: Buy the bond at a price below its par value. Premium above Par: buy the bond at a price above the par value. Par Value: Buy the bond at the price of the value. 11. Assume that a bond with five years to maturity, a par value of $1,000 and$60 annual coupon payments costs $1,100 today. What is the coupon rate? What is the current yield? The coupon rate is 60/1000=6%, and the current yield is 60/1, 1100=5.45%. 14 As an enrolling freshman, would you have been willing to pay $18,000 for four years’ tuition rather than $5,000 per year for four years? (Assume you would be able to do so and that you have no fear of flunking out of college before you graduate) 5000+5000/ (1+4%) +5000/ (1+4%)2+5000/(1+4%)3=18,875.5 > 18.000. So I would like to pay 18.000 for four years tuition. Chapter 6 The structure of Interest rates Four primary determinants of interest rates relationships: 1. term to maturity. 2. Credit risk. 3. Liquidity, 4. Tax treatment 收益曲线走势含义 短期利率受哪些因素影响 Risk Premium 风险溢价: The extra return or interest for the investors for accepting more risk. 13. If the current short-term rate is 5 percent and the current long-term rate is 4 percent, what is the expected short-term interest rate? Chapter 7 Exchange Rates Are Determined Foreign Exchange: The supply of foreign currencies. Exchange Rate: The number of units of foreign currency that can be acquired with one unit of domestic money. Demand for dollars=F (foreign demand for US goods, services and securities) Supply of dollars=F (US demand for foreign gods, services and securities) What factors cause the supply curve of dollars to shift: 1. Changes in US real income; 2. Changes in the dollar price of US. 3. Changes in foreign interest rates relative to US interest rates. Major factors that can alter demand: Changes in foreign real income; 2.Changes in the foreign price of foreign goods relative to the foreign price of US goods. 3. Changes in US interest rates relative to foreign interest rates. 22. If the yen/dollar exchange rate is 125, how much will 25,000 yen cost? If the exchange rate appreciates to 150, how much will the 25,000 yen cost? 25,000/125=$200; 25,000/150=$167 Part 3 Financial Institutions Chapter 8 an Introduction to Financial Intermediaries and Risk Financial Innovation: The creation of new financial instruments, markets and institutions. Contingent Claims或有索取权: Casualty and life insurance benefits, which offer the public some protection from the often catastrophic financial effects of theft accidents, natural disasters and death. Four types of risks faced by all FIs: Default Risk:违约风险 : The borrower will be unwilling or unable to live up to the terms of the liability it has sold. Interest rate 利率风险: The risk that the interest rate will unexpectedly change so that the costs of an FI’s liabilities exceed the earnings on its assets. Liquidity Risk 流动性风险: The risk that will occur when an FI will be required to make a payment when assets that the intermediary has available to make the payment are long-term and cannot be converted to liquid funds quickly without a capital loss. Exchange Rate 汇率风险: The risk that will occur when changes in the exchange rate will cause the dollar value of foreign currency or foreign financial assets to fall. Four Types of FIs: Deposit-Type FIs: Depository institutions include commercial banks, S&Ls (The savings and loan associations), saving banks and credit unions. Commercial Banks: Institutions that issue deposit liabilities that are checkable and extend loans to commercial businesses. Savings associations include S&L and savings banks. Savings and loan associations’（储贷协会） purpose is to pool the savings of local residents to finance the construction and purchase of homes. Savings banks(储蓄银行) were funded to encourage thrift and to help finance the construction and purchase f homes. Credit Unions: They are cooperative nonprofit tax exempt associations operated solely for the benefit of members. Contractual-Type FIs: Life insurance companies, Pension funds. Life insurance companies offer the protection against the financial costs, losses and reductions in income associated with death, disability, old age and various other health problems. Pension funds are tax-exempt institutions set up to provide participants with retirement income that will supplement other sources of income, such as social security benefits. Investment-Type FIs: Mutual funds, Money market mutual funds. Mutual funds acquire and pool fund from the public, invest the funds incapital market instruments, and return the income received minus a management fee to the investors. Money market mutual funds: They acquire funds from individual investors and pool then to purchase money market instruments such as Treasury bills, bank CDs, and commercial paper. Finance Company-Type FIs Finance companies: They lend funds to households to finance the purchase of consumer derives such as automobiles, appliances and furniture and to business to finance inventories and the purchase or leasing of equipment. Chapter 9 Commercial Banking Structure, Regulation and Performance Bank Holding Company: A corporation that owns several firms, at least one of which is a bank. Financial Holding companies: A financial company can offer their customers a complete range of financial services, many of which were previously prohibited. Asymmetric Information信息不对称: A potential borrower knows more about the risks and returns of an investment product than the bank loan officer. Adverse Selection Problem: When the least-desirable borrowers pursue a loan most diligently. Moral hazard problem – When the borrower has an incentive to use the proceeds of a loan for a riskier venture after the loan is funded. Chapter 10 Financial Innovation Disintermediation脱媒: A removal of funds from banks and other intermediaries. Nondeposit Liability: Borrowed funds, such as Eurodollar borrowings, fed funds, and repurchase agreements, that are not deposits and are not subject to reserve requirements. Derivatives – Instruments such as forward, futures, options, swap, and other agreements that are routinely used to separate the total risk of a financial asset into subparts and that derive their value from the underlying assets. Interest rate swap – A financial innovation used to reduce the risk of future interest rate changes over a long period of time that involve two parties trading interest payment streams to guarantee that their respective payment inflows will more closely match their outflows. Currency swap – A financial innovation used to hedge exchange rate risk over a long period of time, whereby one party agrees to trade periodic payments in a given currency with another party who agrees to do the same in a different currency. Chapter 11 Financial Instability and strains on the Financial System Junk Bonds: Bonds rated below investment grade or too risky for investment; also called high-yield(高收益0 bonds Financial Crisis: A critical upset in a financial market that is characterized by sharp declines in asset prices and the default of many financial and nonfinancial firms.. Four different factors may increase the probability of a financial crisis. 1. A sharp unexpected rise in interest rates increases the likelihood of multiple defaults. 2. A fall in stock value can set off a chain of events that increases the likelihood of a financial crisis. 3. Unanticipated declines in the overall level of prices can also intensify the risk of a financial crisis. 4. In recent years, many financial crises have been global in nature with a crisis in one country quickly spreading to others in the region and beyond. Part 4 Financial Markets Chapter 12 The International Financial System Special Drawing Rights(SDRs0: The international reserve assets created by the IMF that supplement other international reserves. International Monetary Funds (IMF) – An organization created in 1944 to oversee the monetary and exchange rate policies of its members who pay quotas that are used to assist countries with temporary imbalances in their balance of payments. World Bank – An investment bank created in 1944 that issues bonds to make long-term loans at low interest rates to poor countries for economic development projects. The Bank for International Settlements (BIS) – An international financial organization that promotes international cooperation among central banks and provides facilities for international financial operations. 21. Graphically demonstrate what would happen to the exchange rate in each of the following situations: 1. The US trade deficit increases, ceteris paribus 2. The US trade deficit decreases, ceteris paribus 3. Capital outflows increase, ceteris paribus 4. Capital inflows increase, ceteris paribus 1. The trade deficit increases, the supply of dollars decreases, the rate decreases. 2. On the contrary, the rate increases. 3. Foreign countries’ rates increase, the demand for US dollars decreases, the rate decreases. 4. On the country, the rate increases. Chapter 13 The Fed, Depository Institutions, and the Money Supply Process Open Market operations: Open market operations – The buying and selling of government securities by the Fed. Loan up – Situation when a bank has no excess reserves left to serve as a basis for lending 修正的货币乘数公式：(1+C)/ ( Rd + e + C ) C: Currency; Rd: Required Reserve Ratio e: Excess reserves. Money Multiplier: The multiple of the change in the monetary base by which the money supply will change. P305 资产负债表 Chapter 14 The Demand for Real Money Balances and Market Equilibrium Real money balances – The quantity of money expressed in real terms; the nominal money supply, M, divided by overall price level, P, or M/P. Transaction motive – A motive for holding money based on the need to make payments. Precautionary motive – A motive for holding money based on the desire to protect against unforeseen Decision Rule of holding real money balances: The household should increase its holdings of real money balances as long as the benefits of dong so outweigh the costs. Benefits of holding real money balances – The stream of services that real balances yield defined as the time and distress saved by having money on hand for immediate use. Cost of holding real money balances – The additional forgone interest that holding nonmonetary financial assets would have yielded. Additional Factors Affecting the Demand for Real Money Balances 1. Wealth: direct relationship 2. Payment technologies: inverse relationship. The widespread availability allowing funds to be easily transferred between checking and savings balances, reduces the demand for real money balances 3. Expected inflation: inverse relationship. If inflation occurs, the value of the real money balances falls. The larger the initial money balances are, the greater is the risk of incurring losses if inflation should occur. Expectations of higher inflation, reduce the demand for real money balances. 4. Liquidity of other financial assets: inverse If the liquidity of other financial assets increases, they are better substitutes for real money balances and can be held instead of real money balances. Thus, increases in the liquidity of other financial assets reduce the demand for real money balances 5. Risk of holding other assets: direct relationship. If the risk of holding other assets increases, the demand for real money balances increases. Chapter 15 Aggregate Demand and Aggregate Supply Three effects to explain why the aggregate demand curve is downward sloping.: Wealth effect or real balances effect Substitution-of-foreign-goods effect Constant nominal income effect · 1. when the overall price level changes for a given nominal money supply, the supply of real money balances changes. p↑, money supply is constant → real money balances ↓→ wealth ↓→demand for real GDP ↓ · 2. when the overall price level changes, ceteris paribus, domestic goods and services become relatively cheaper or relatively more expensive than foreign goods, which can lead to changes in net exports. p↑→ US goods expensive while foreign goods relatively cheaper → net exports ↓→real GDP ↓ · 3.when we study the aggregate demand curve, we hold other factors, including nominal income constant. Nominal income = p * real GDP What causes aggregate demand to change? A change in taxes, government spending, the money supply, interest rates, expected inflation, the economic outlook, and exchange rate can individually trigger changes in aggregate demand. P364 15-6 图 Demand-Pull Inflation需求拉动型通胀：Sustained increases in the overall price level due to high levels of demand. Part6 Monetary Policy Chapter 16 The Challenges of Monetary Policy Stagflation: A condition of concurrent high unemployment and high inflation. The Goals of Monetary Policy: economic growth (long run); full employment; stable prices, and a satisfactory external balance(short run) Deflation: A drop in the overall price level as measured by a price index. Supply Shock: Any event that shifts the short-run aggregate supply curve. Chapter 17 The Process of Monetary Policy Formulation Recognition Lag: The time between a significant and unexpected change in the economy’s performance and policy makers’ recognition of that change is called the recognition lag. Policy Lag: The time between the point when the need for action is recognized and the point when an adjustment policy is decided upon and set in motion. Impact Lag: The time between when an action is taken and when that action has a significant impact on prices, employment and output. Intermediate Target: The formulation and implementation of policy rather than focusing on the ultimate goals. Operating Target: The goal which is highly responsive to open market operations, and is controlled by policy tools The breakdown in the traditional relationships between monetary aggregates and economic activity caused an abandonment of the use of monetary aggregates as either targets or information variables in the early 1990s. 17. Assume that the Fed is targeting an interest rate and aggregate demand drops. Show graphically why the Fed will have to reduce the supply of money to maintain the interest rate target. Chapter 18 Policy Implementation Reserve Need: The difference, if any, between actual reserves and those projected to be needed to keep the fed funds rate at the desired level. P432 看图