货币金融学答案

货币金融学答案55Chapter1WhyStudyMoney,Banking,andFinancialMarkets2.ThedatainFigures1,2,3,and4suggestthatrealoutput,theinflationrate,andinterestrateswouldallfail.4.Youmightbemorelikelytobuyahouseoracarbecausethecostoffinancingthemwouldfall,oryoumightbelesslikelytosavebecauseyouearnlessonyoursavings.6.No.Itistruethatpeoplewhoborrowtopurchaseahouseoracarareworseoffbecauseitcoststhemmoretofinancetheirpurchase;however,saversbenefitbecausetheycanearnhigherinterestratesontheirsavings.7.Thebasicactivityofbanksistoacceptdepositsandmakeloans.8.Theychannelfundsfrompeoplewhodonothaveaproductiveuseforthemtopeoplewhodo,therebyresultinginhighereconomicefficiency.9.Theinterestrateonthree-monthTreasurybillsfluctuatesmorethantheotherinterestratesandisloweronaverage.TheinterestrateonBaacorporatebondsishigheronaveragethantheotherinterestrates.10.Thelowerpriceforafirm’ssharesmeansthatitcanraiseasmalleramountoffunds,soinvestmentinfacilitiesandequipmentwillfall.11.Higherstockpricesmeansthatconsumers’wealthishigher,andtheywillbemorelikelytoincreasetheirspending.12.Itmakesforeigngoodsmoreexpensive,soBritishconsumerswillbuyfewerforeigngoodsandmoredomesticgoods.13.ItmakesBritishgoodsmoreexpensiverelativetoAmericangoods.ThusAmericanbusinesseswillfinditeasiertoselltheirgoodsintheUnitedStatesandabroad,andthedemandfortheirproductswillrise.14.Inthemid-tolate1970sandinthelate1980sandearly1990s,thevalueofthedollarwaslow,makingtravelabroadrelativelymoreexpensive;thusitwasagoodtimetovacationintheUnitedStatesandseetheGrandCanyon.Withtheriseinthedollar’svalueintheearly1980s,travelabroadbecamerelativelycheaper,makingitagoodtimetovisittheTowerofLondon.15.Whenthedollarincreasesinvalue,foreigngoodsbecomelessexpensiverelativetoAmericangoods;thusyouaremorelikelytobuyFrench-madejeansthanAmerican-madejeans.TheresultingdropindemandforAmerican-madejeansbecauseofthestrongdollarhurtsAmericanjeansmanufacturers.Ontheotherhand,theAmericancompanythatimportsjeansintotheUnitedStatesnowfindsthatthedemandforitsproducthasrisen,soitisbetteroffwhenthedollarisstrong.56Chapter2AnOverviewoftheFinancialSystem1.TheshareofMicrosoftstockisanassetforitsowner,becauseitentitlestheownertoashareoftheearningsandassetsofMicrosoft.TheshareisaliabilityforMicrosoft,becauseitisaclaimonitsearningsandassetsbytheowneroftheshare.2.Yes,Ishouldtakeouttheloan,becauseIwillbebetteroffasaresultofdoingso.Myinterestpaymentwillbe$4,500(90%of$5,000),butasaresult,Iwillearnanadditional$10,000,soIwillbeaheadofthegameby$5,500.SinceLarry’sloan-sharkingbusinesscanmakesomepeoplebetteroff,asinthisexample,loansharkingmayhavesocialbenefits.(Oneargumentagainstlegalizingloansharking,however,isthatitisfrequentlyaviolentactivity.)3.Yes,becausetheabsenceoffinancialmarketsmeansthatfundscannotbechanneledtopeoplewhohavethemostproductiveuseforthem.Entrepreneursthencannotacquirefundstosetupbusinessesthatwouldhelptheeconomygrowrapidly.4.TheprincipaldebtinstrumentsusedwereforeignbondswhichweresoldinBritainanddenominatedinpounds.TheBritishgainedbecausetheywereabletoearnhigherinterestratesasaresultoflendingtoAmericans,whiletheAmericansgainedbecausetheynowhadaccesstocapitaltostartupprofitablebusinessessuchasrailroads.5.Thisstatementisfalse.Pricesinsecondarymarketsdeterminethepricesthatfirmsissuingsecuritiesreceiveinprimarymarkets.Inaddition,secondarymarketsmakesecuritiesmoreliquidandthuseasiertosellintheprimarymarkets.Therefore,secondarymarketsare,ifanything,moreimportantthanprimarymarkets.6.Youwouldratherholdbonds,becausebondholdersarepaidoffbeforeequityholders,whoaretheresidualclaimants.7.Becauseyouknowyourfamilymemberbetterthanastranger,youknowmoreabouttheborrower’shonesty,propensityforrisktaking,andothertraits.Thereislessasymmetricinformationthanwithastrangerandlesslikelihoodofanadverseselectionproblem,withtheresultthatyouaremorelikelytolendtothefamilymember.9.Loansharkscanthreatentheirborrowerswithbodilyharmifborrowerstakeactionsthatmightjeopardizetheirpayingofftheloan.Henceborrowersfromaloansharkarelesslikelytoincreasemoralhazard.10.Theymightnotworkhardenoughwhileyouarenotlookingormaystealorcommitfraud.11.Yes,becauseevenifyouknowthataborroweristakingactionsthatmightjeopardizepayingofftheloan,youmuststillstoptheborrowerfromdoingso.Becausethatmaybecostly,youmaynotspendthetimeandefforttoreducemoralhazard,andsotheproblemofmoralhazardstillexists.5712.True.Iftherearenoinformationortransactionscosts,peoplecouldmakeloanstoeachotheratnocostandwouldthushavenoneedforfinancialintermediaries.13.Becausethecostsofmakingtheloantoyourneighborarehigh(legalfees,feesforacreditcheck,andsoon),youwillprobablynotbeableearn5%ontheloanafteryourexpenseseventhoughithasa10%interestrate.Youarebetteroffdepositingyoursavingswithafinancialintermediaryandearning5%interest.Inaddition,youarelikelytobearlessriskbydepositingyoursavingsatthebankratherthanlendingthemtoyourneighbor.14.Arankingfrommostliquidtoleastliquidis(a),(b),(c),and(d).Therankingissimilarforthemostsafetotheleastsafe.15.Increaseddiscussionofforeignfinancialmarketsinthe.pressandthegrowthinmarketsforinternationalfinancialinstrumentssuchasEurodollarsandEurobonds.58Chapter3WhatIsMoney1.(b)2.Becausetheorchardownerlikesonlybananasbutthebananagrowerdoesn’tlikeapples,thebananagrowerwillnotwantapplesinexchangeforhisbananas,andtheywillnottrade.Similarly,thechocolatierwillnotbewillingtotradewiththebananagrowerbecauseshedoesnotlikebananas.Theorchardownerwillnottradewiththechocolatierbecausehedoesn’tlikechocolate.Hence,inabartereconomy,tradeamongthesethreepeoplemaywellnottakeplace,becauseinnocaseisthereadoublecoincidenceofwants.However,ifmoneyisintroducedintotheeconomy,theorchardownercansellhisapplestothechocolatierandthenusethemoneytobuybananasfromthebananagrower.Similarly,thebananagrowercanusethemoneyshereceivesfromtheorchardownertobuychocolatefromthechocolatier,andthechocolatiercanusethemoneytobuyapplesfromtheorchardowner.Theresultisthattheneedforadoublecoincidenceofwantsiseliminated,andeveryoneisbetteroffbecauseallthreeproducersarenowabletoeatwhattheylikebest.3.Cavemendidnotneedmoney.Intheirprimitiveeconomy,theydidnotspecializeinproducingonetypeofgoodandtheyhadlittleneedtotradewithothercavemen.4.Becauseacheckwassomucheasiertotransportthangold,peoplewouldfrequentlyratherbepaidbycheckeveniftherewasapossibilitythatthecheckmightbounce.Inotherwords,thelowertransactionscostsinvolvedinhandlingchecksmadepeoplemorewillingtoacceptthem.5.Wineismoredifficulttotransportthangoldandisalsomoreperishable.Goldisthusabetterstoreofvaluethanwineandalsoleadstolowertransactionscost.Itisthereforeabettercandidateforuseasmoney.6.Becausemoneywaslosingvalueataslowerrate(theinflationratewaslower)inthe1950sthaninthe1970s,itwasthenabetterstoreofvalue,andyouwouldhavebeenwillingtoholdmoreofit.7.Notnecessarily.Checkshavetheadvantageinthattheyprovideyouwithreceipts,areeasiertokeeptrackof,andmaymakeitharderforsomeonetostealmoneyoutofyouraccount.Theseadvantagesofchecksmayexplainwhythemovementtowardachecklesssocietyhasbeenverygradual.8.Therankingfrommostliquidtoleastliquidis:(a),(c),(e),(f),(b),and(d).9.Moneylosesitsvalueatanextremelyrapidrateinhyperinflation,soyouwanttoholditforasshortatimeaspossible.Thusmoneyislikeahotpotatothatisquicklypassedfromonepersontoanother.10.BecauseoftherapidinflationinBrazil,thedomesticcurrency,thereal,isapoorstoreofvalue.Thusmanypeoplewouldratherholddollars,whichareabetterstoreofvalue,andusethemintheirdailyshopping.5911.Notnecessarily.AlthoughthetotalamountofdebthaspredictedinflationandthebusinesscyclebetterthanM1orM2,itmaynotbeabetterpredictorinthefuture.Withoutsometheoreticalreasonforbelievingthatthetotalamountofdebtwillcontinuetopredictwellinthefuture,wemaynotwanttodefinemoneyasthetotalamountofdebt.13.M1containsthemostliquidassets.M2isthelargestmeasure.14.(a)M1andM2,(b)M2,(c)M2,(d)M1andM2.15.Revisionsarenotaseriousproblemforlong-runmovementsofthemoneysupply,becauserevisionsforshort-run(one-month)movementstendtocancelout.Revisionsforlong-runmovements,suchasone-yeargrowthrates,arethustypicallyquitesmall.60Chapter4UnderstandingInterestRates1.Less.Itwouldbeworth1/(1+=$whentheinterestrateis20%,ratherthan1/(1+=$whentheinterestrateis10%.2.No,becausethepresentdiscountedvalueofthesepaymentsisnecessarilylessthan$10millionaslongastheinterestrateisgreaterthanzero.3.$1,000/(1++$1,210/(1+2+$1,331/(1+3=$3,0004.Theyieldtomaturityislessthan10percent.Onlyiftheinterestratewaslessthan10percentwouldthepresentvalueofthepaymentsaddupto$4,000,whichismorethanthe$3,000presentvalueinthepreviousproblem.5.$2,000+$100/(1+i)+$100/(1+i)2+...+$100/(1+i)20+$1,000/(1+i)20.6.25%=($1,000–$800)/$800=$200/$800=5.7.%,derivedasfollows:Thepresentvalueofthe$2millionpaymentfiveyearsfromnowis$2/(1+i)5million,whichequalsthe$1millionloan.Thus1=2/(1+i)5.Solvingfori,(1+i)5=2,sothat521%.i===8.Iftheinterestratewere12percent,thepresentdiscountedvalueofthepaymentsonthegovernmentloanarenecessarilylessthanthe$1,000loanamountbecausetheydonotstartfortwoyears.Thustheyieldtomaturitymustbelowerthan12percentinorderforthepresentdiscountedvalueofthesepaymentstoaddupto$1,000.9.Iftheone-yearbonddidnothaveacouponpayment,itsyieldtomaturitywouldbe($1,000$800)/$800$200/$800==25%.Becauseitdoeshaveacouponpayment,itsyieldtomaturitymustbegreaterthan25%.However,becausethecurrentyieldisagoodapproximationoftheyieldtomaturityforatwenty-yearbond,weknowthattheyieldtomaturityonthisbondisapproximately15%.Therefore,theone-yearbondhasahigheryieldtomaturity.10.Thecurrentyieldwillbeagoodapproximationtotheyieldtomaturitywheneverthebondpriceisveryclosetoparorwhenthematurityofthebondisovertenyears.11.YouwouldratherowntheTreasurybill,becauseithasahigheryieldtomaturity.Astheexampleinthetextindicates,thediscountyield’sunderstatementoftheyieldtomaturityforaone-yearbillissubstantial,exceedingonepercentagepoint.Thustheyieldtomaturityontheone-yearbillwouldbegreaterthan9%,theyieldtomaturityontheone-yearTreasurybond.12.Youwouldratherbeholdinglong-termbondsbecausetheirpricewouldincreasemorethanthepriceoftheshort-termbonds,givingthemahigherreturn.6113.No.Ifinterestratesrisesharplyinthefuture,long-termbondsmaysuffersuchasharpfallinpricethattheirreturnmightbequitelow—possiblyevennegative.14.Peoplearemorelikelytobuyhousesbecausetherealinterestratewhenpurchasingahousehasfallenfrom3percent(=5percent2percent)to1percent(=10percent9percent).Therealcostoffinancingthehouseisthuslower,eventhoughmortgagerateshaverisen.(Ifthetaxdeductibilityofinterestpaymentsisallowedfor,thenitbecomesevenmorelikelythatpeoplewillbuyhouses.)15.Theeconomistsareright.Theyreasonthatnominalinterestrateswerebelowexpectedratesofinflationinthelate1970s,makingrealinterestratesnegative.Theexpectedinflationrate,however,fellmuchfasterthannominalinterestratesinthemid-1980s,sonominalinterestrateswereabovetheexpectedinflationrateandrealratesbecamepositive.62Chapter5TheBehaviorofInterestRates1.(a)Less,becauseyourwealthhasdeclined;(b)more,becauseitsrelativeexpectedreturnhasrisen;(c)less,becauseithasbecomelessliquidrelativetobonds;(d)less,becauseitsexpectedreturnhasfallenrelativetogold;(e)more,becauseithasbecomelessriskyrelativetobonds.2.(a)More,becauseyourwealthhasincreased;(b)more,becausethehousehasbecomemoreliquid;(c)less,becauseitsexpectedreturnhasfallenrelativetoMicrosoftstock;(d)more,becauseithasbecomelessriskyrelativetostocks;(e)less,becauseitsexpectedreturnhasfallen.3.(a)More,becauseithasbecomemoreliquid;(b)less,becauseithasbecomemorerisky;(c)more,becauseitsexpectedreturnhasrisen;(d)more,becauseitsexpectedreturnhasrisenrelativetotheexpectedreturnonlong-termbonds,whichhasdeclined.4.(a)More,becausethebondshavebecomemoreliquid;(b)more,becausetheirexpectedreturnhasrisenrelativetostocks;(c)less,becausetheyhavebecomelessliquidrelativetostocks;(d)less,becausetheirexpectedreturnhasfallen;(e)more,becausetheyhavebecomemoreliquid.5.Theriseinthevalueofstockswouldincreasepeople’swealthandthereforethedemandforRembrandtswouldrise.6.WhentheFedsellsbondstothepublic,itincreasesthesupplyofbonds,thusshiftingthesupplycurveBstotheright.TheresultisthattheintersectionofthesupplyanddemandcurvesBsandBdoccursatalowerpriceandahigherequilibriuminterestrate,andtheinterestraterises.Withtheliquiditypreferenceframework,thedecreaseinthemoneysupplyshiftsthemoneysupplycurveMstotheleft,andtheequilibriuminterestraterises.Theanswerfrombondsupplyanddemandanalysisisconsistentwiththeanswerfromtheliquiditypreferenceframework.7.Intheloanablefundsframework,whentheeconomybooms,thedemandforbondsincreases.Thepublic’sincomeandwealthriseswhilethesupplyofbondsalsoincreases,becausefirmshavemoreattractiveinvestmentopportunities.Boththesupplyanddemandcurves(BdandBs)shifttotheright,butasisindicatedinthetext,thedemandcurveprobablyshiftslessthanthesupplycurvesotheequilibriuminterestraterises.Similarly,whentheeconomyentersarecession,boththesupplyanddemandcurvesshifttotheleft,butthedemandcurveshiftslessthanthesupplycurvesothattheinterestratefalls.Theconclusionisthatinterestratesriseduringboomsandfallduringrecessions:thatis,interestratesareprocyclical.Thesameanswerisfoundwiththeliquiditypreferenceframework.Whentheeconomybooms,thedemandformoneyincreases;peopleneedmoremoneytocarryoutanincreasedamountoftransactionsandalsobecausetheirwealthhasrisen.Thedemandcurve,Md,thusshiftstotheright,raisingtheequilibriuminterestrate.Whentheeconomyentersarecession,thedemandformoneyfallsandthedemandcurveshiftstotheleft,loweringtheequilibriuminterestrate.Again,interestratesareseentobeprocyclical.638.Whenthepricelevelrises,thequantityofmoneyinrealtermsfalls(holdingthenominalsupplyofmoneyconstant);torestoretheirholdingsofmoneyinrealtermstotheirformerlevel,peoplewillwanttoholdagreaternominalquantityofmoney.ThusthemoneydemandcurveMdshiftstotheright,andtheinterestraterises.10.Interestratesfall.Theincreasedvolatilityofgoldpricesmakesbondsrelativelylessriskyrelativetogoldandcausesthedemandforbondstoincrease.Thedemandcurve,Bd,shiftstotherightandtheequilibriuminterestratefalls.11.Interestrateswouldrise.Asuddenincreaseinpeople’sexpectationsoffuturerealestatepricesraisestheexpectedreturnonrealestaterelativetobonds,sothedemandforbondsfalls.ThedemandcurveBdshiftstotheleft,bondpricesfall,andtheequilibriuminterestraterises.12.Interestratesmightrise.ThelargefederaldeficitsrequiretheTreasurytoissuemorebonds;thusthesupplyofbondsincreases.Thesupplycurve,Bs,shiftstotherightandtheequilibriuminterestraterises.SomeeconomistsbelievethatwhentheTreasuryissuesmorebonds,thedemandforbondsincreasesbecausetheissueofbondsincreasesthepublic’swealth.Inthiscase,thedemandcurve,Bd,alsoshiftstotheright,anditisnolongerclearthattheequilibriuminterestratewillrise.Thusthereissomeambiguityintheanswertothisquestion.13.Inthebondsupplyanddemandanalysis,theincreasedriskinessofbondslowersthedemandforbonds.ThedemandcurveBdshiftstotheleft,andtheequilibriuminterestraterises.Thesameanswerisfoundintheliquiditypreferenceframework.Theincreasedriskinessofbondsrelativetomoneyincreasesthedemandformoney.ThemoneydemandcurveMdshiftstotheright,andtheequilibriuminterestraterises.14.Thepriceleveleffecthasitsmaximumimpactbytheendofthefirstyear,andsincethepriceleveldoesnotfallfurther,interestrateswillnotfallfurtherasaresultofapriceleveleffect.Ontheotherhand,expectedinflationreturnstozerointhesecondyear,sothattheexpectedinflationeffectreturnstozero.Onefactorproducinglowerinterestratesthusdisappears,so,inthesecondyear,interestratesmayrisesomewhatfromtheirlowpointattheendofthesecondyear.15.Yes,interestrateswillrise.Thelowercommissiononstocksmakesthemmoreliquidthanbonds,andthedemandforbondswillfall.ThedemandcurveBdwillthereforeshifttotheleft,andtheequilibriuminterestratewillrise.16.Ifthepublicbelievesthepresident’sprogramwillbesuccessful,interestrateswillfall.Thepresident’sannouncementwilllowerexpectedinflationsothattheexpectedreturnongoodsdecreasesrelativetobonds.Thedemandforbondsincreasesandthedemandcurve,Bd,shiftstotheright.Foragivennominalinterestrate,thelowerexpectedinflationmeansthattherealinterestratehasrisen,raisingthecostofborrowingsothatthesupplyofbondsfalls.Theresultingleftwardshiftofthesupplycurve,Bs,andtherightwardshiftofthedemandcurve,Bd,causestheequilibriuminterestratetofall.17.TheinterestrateontheAT&Tbondswillrise.Becausepeoplenowexpectinterestratestorise,theexpectedreturnonlong-termbondssuchasthe81/8sof2022willfall,andthedemandforthesebondswilldecline.ThedemandcurveBdwillthereforeshifttotheleft,thepricewillfall,andtheequilibriuminterestratewillrise.18.Interestrateswillrise.Theexpectedincreaseinstockpricesraisestheexpectedreturnonstocksrelativetobondsandsothedemandforbondsfalls.Thedemandcurve,Bd,shiftstotheleftandtheequilibriuminterestraterises.6419.Interestrateswillrise.Whenbondpricesbecomevolatileandbondsbecomeriskier,thedemandforbondswillfall.ThedemandcurveBdwillshifttotheleft,thepricewillfall,andtheequilibriuminterestratewillrise.20.Theslowerrateofmoneygrowthwillleadtoaliquidityeffect,whichraisesinterestrates,whilethelowerpricelevel,income,andinflationratesinthefuturewilltendtolowerinterestrates.Therearethreepossiblescenariosforwhatwillhappen:(a)iftheliquidityeffectislargerthantheothereffects,theninterestrateswillrise;(b)iftheliquidityeffectissmallerthantheothereffectsandexpectedinflationadjustsslowly,theninterestrateswillriseatfirstbutwilleventuallyfallbelowtheirinitiallevel;and(c)iftheliquidityeffectissmallerthantheexpectedinflationeffectandthereisrapidadjustmentofexpectedinflation,theninterestrateswillimmediatelyfall.65Chapter6TheRiskandTermStructureofInterestRates1.ThebondwithaCratingshouldhaveahigherinterestratebecauseithasahigherdefaultrisk,whichreducesitsdemandandraisesitsinterestraterelativetothatontheBaabond.2.TreasurybillshavelowerdefaultriskandmoreliquiditythannegotiableCDs.Consequently,thedemandforTreasurybillsishigher,andtheyhavealowerinterestrate.3.Duringbusinesscyclebooms,fewercorporationsgobankruptandthereislessdefaultriskoncorporatebonds,whichlowerstheirriskpremium.Similarly,duringrecessions,defaultriskoncorporatebondsincreasesandtheirriskpremiumincreases.Theriskpremiumoncorporatebondsisthusanticyclical,risingduringrecessionsandfallingduringbooms.4.True.Whenbondsofdifferentmaturitiesareclosesubstitutes,ariseininterestratesforonebondcausestheinterestratesforotherstorisebecausetheexpectedreturnsonbondsofdifferentmaturitiescannotgettoofaroutofline.5.Ifyieldcurvesonaveragewereflat,thiswouldsuggestthattheriskpremiumonlong-termrelativetoshort-termbondswouldequalzeroandwewouldbemorewillingtoaccepttheexpectationshypothesis.6.(a)Theyieldtomaturitywouldbe5%foraone-yearbond,6%foratwo-yearbond,%forathree-yearbond,%forafour-yearbond,and%forafive-yearbond.(b)Theyieldtomaturitywouldbe5%foraone-yearbond,%foratwo-yearbond.%forathree-yearbond,%forafour-yearbond,and%forafive-yearbond.Theupwardslopingyieldcurvein(a)wouldbeevensteeperifpeoplepreferredshort-termbondsoverlong-termbonds,becauselong-termbondswouldthenhaveapositiveliquiditypremium.Thedownward-slopingyieldcurvein(b)wouldbelesssteepandmighthaveaslightpositiveupwardslopeifthelong-termbondshaveapositiveliquiditypremium.7.(a)Theyieldtomaturitywouldbe5percentforaone-yearbond,percentforatwo-yearbond,6percentforathree-yearbond,6percentforafour-yearbond,andpercentforafive-yearbond;(b)theyieldtomaturitywouldbe5percentforaone-yearbond,percentforatwo-yearbond,4percentforathree-yearbond,4percentforafour-yearbond,andpercentforafive-yearbond.Theupward-andthendownward-slopingyieldcurvein(a)wouldtendtobeevenmoreupwardslopingifpeoplepreferredshort-termbondsoverlong-termbondsbecauselong-termbondswouldthenhaveapositiveriskpremium.Thedownward-andthenupward-slopingyieldcurvein(b)alsowouldtendtobemoreupwardslopingbecauseofthepositiveriskpremiumforlong-termbonds.8.Theflatyieldcurveatshortermaturitiessuggeststhatshort-terminterestratesareexpectedtofallmoderatelyinthenearfuture,whilethesteepupwardsslopeoftheyieldcurveatlongermaturitiesindicatesthatinterestratesfurtherintothefutureareexpectedtorise.Becauseinterestratesandexpectedinflationmovetogether,theyieldcurvesuggeststhatthemarketexpectsinflationtofallmoderatelyinthenearfuturebuttoriselateron.669.Thesteepupward-slopingyieldcurveatshortermaturitiessuggeststhatshort-terminterestratesareexpected