货币银行学章节知识点及问题答案货币银行学章节知识点及问题答案Chapter 1 Why Study Money, Banking ,and Financial Markets?1.Financial markets: markets in which funds are transferred from peoplewho have an excess of available funds Lo people who have a shortage.2.Interest rate: an interest rate is the cost of borrowing or the pricepaid for the rental of funds3.Stock : A common stock (typically just called a stock) represents ashare of ownership in a corporation.4.Money : Money is defined as anything that is generally accepted inpayment for goods or services or in the repayment of debts.5.Foreign exchange market : The foreign exchange market is where thisconversion takes place, so it is instrumental in moving funds betweencountries.6.Foreign exchange rate :the price of one country's currency in termsof another's.Questions and answersNum.1:Why study money ,banking and financial markets?A: 1.To examine how financial markets such as bond ,stock and foreignexchange markets work.2.To examine how financial institutions such as banks andinsurance companies work.3.To examine the role of money in the economy.Num.2:What is the banking and financial institution?A: 1. financial intermediaries, institutions that borrow fundsfrom people who have saved and in turn make loans to others.2.Banks are financial institutions that accept deposits andmake loans.3.Other financial institutions—insurance companies, financecompanies, pension funds, mutual funds and investment banks.Num.3:How we will study money ,banking and financial markets?A: 1. Exploring the Web2.Collecting and Graphing Data.Chapter 2 An overview of the Financial System1.Capital(资本) : wealth, either financial or physical, that is employedto produce more wealth.2.Primary market : A primary market is a financial market in which newissues of a security, such as a bond or a stock, are sold to initialbuyers by the corporation or government agency borrowing the funds.3.Secondary market : A secondary market is a financial market in whichsecurities that have been previously issued can be resold.4.Exchanges (证券交易所): where buyers and sellers of securities (ortheir agents or brokers) meet in one central location to conduct trades.5.Capital market : The capital market is the market in which longer-termdebt and equity instruments are traded.Questions and answersNum.1: How could Secondary markets be organized?A: Secondary markets can be organized in two ways. One method is to organize exchanges, where buyers and sellers of securities (or their agents or brokers) meet in one central location to conduct trades.The other method of organizing a secondary market is to have an over-the-counter (OTC) market.Num.2:How to distinguish between money and capital market?A:Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.short-term securities have smaller fluctuations in prices than long-term securities, making them safer investments. As a result, corporations and banks actively use the money market to earn interest on surplus funds that they expect to have only temporarily. Capital market securities, such as stocks and long-term bonds, are often held by financial intermediaries such as insurance companies and pension funds, which have little uncertainty about the amount of funds they will have available in the future.Num. 3:What’s the International Bond Market, Eurobonds, and Eurocurrencies?A:The traditional instruments in the international bond market are known as foreign bonds. Foreign bonds are sold in a foreign country and are denominated in that country's currency.The Eurobond is a bond denominated in a currency other than that of the country in which it is sold.Eurocurrencies, which are foreign currencies deposited in banks outside the home country. The most important of the Eurocurrencies are Eurodollars.Chapter 3 What Is Money?1.Wealth : The total collection of pieces of property that serve to storevalue.2.Income : Income is a flow of earnings per unit of Lime.3.Medium of exchange : promotes economic efficiency by minimizing thetime spent in exchanging goods and services.4.Store of value : It is a repository of purchasing power over time.A store of value is used to save purchasing power from the time incomeis received until the time it is spent.5.Electronic money (or e-money): money that exists only in electronicform.6.Ml : which includes the most liquid assets: currency, checking accountdeposits, and travelers checks.Questions and answersNum.1: Example the evolution of the Payments System.A: Commodity MoneyFiat MoneyChecksElectronic PaymentE-MoneyNum.2:Explain M1 and M2.A:The narrowest measure of money that the Fed reports is Ml, which includes the most liquid assets: currency, checking accountdeposits, and traveler’s checks.The M2 monetary aggregate adds to M l other assets that are notquite as liquid as those included in M l: assets that havecheck-writing features (money market deposit accounts and moneymarket mutual fund shares) and other assets (savings depositsand small-denomination time deposits) that can be turned intocash quickly at very little cost.Num.3:What the function of money?A: 1.Medium of ExchangeIn almost all market transactions in our economy,money in the form of currency or checks is a mediumof exchange; it is used to pay for goods and services.The use of money as a medium of exchange promoteseconomic efficiency by minimizing the time spent inexchanging goods and services.2. Unit of AccountUnit of account, that is, it is used to measure valuein the economy. We measure the value of goods andservices in terms of money, just as we measure weightin terms of pounds or distance in terms of miles.3.Store of ValueStore of value it is a repository of purchasing powerover time. A store of value is used to save purchasingpower from the time income is received until the timeit is spent. This function of money is useful, becausemost of us do not want to spend our income immediatelyupon receiving it, but rather prefer to wait until wehave the time or the desire to shop.Chapter 4 Understanding Interest Rates1.Present value (or Present discounted value): a dollar paid to you oneyear from now is less valuable to you than a dollar paid to you today.2.Yield to Maturity(到期收益率)：the interest rate that equates thepresent value of cash flow payments received from a debt instrument with its value today.3.Coupon bond(息票债券)：A coupon bond pays the owner of the bond a fixedinterest payment every year until the maturity date, when a specified final amount is repaid.4.Consol (有蓄) or perpetuity（永久债券）: it is a perpetual bond withno maturity date and no repayment of principal that makes fixed coupon payments of $C forever.5.Nominal interest rate :The interest rate makes no allowance forinflation6.Real interest rate : The interest rate that is adjusted by subtractingexpected changes in the price level (inflation) so that it more accurately reflects the true cost of borrowing.Questions and answersNum.1: Distinguish between Fixed-Payment and Coupon Bond.A:1)When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.2) The price of a coupon bond and the yield to maturity arenegatively related; that is, as the yield to maturity rises,the price of the bond falls As the yield to maturity falls,the price of the bond rises.3) The yield to maturity is greater than the coupon rate whenthe bond price is below its face value.Num.2:The distinction between real and nominal interest rates.A:The interest rate makes no allowance for inflation, and it is more precisely referred to as the nominal interest rate. We distinguish it from the real interest rate, the interest rate that is adjusted by subtracting expected changes in the price level (inflation) so that it more accurately reflects the true cost of borrowing. This interest rate is more precisely referred to as the ex ante real interest rate because it is adjusted for expected changes in the price level. The ex ante real interest rate that is most important to economic decisions, and typically it is what economists mean when they make reference to the "real" interest rate.ir=i-πi = nominal interest rateπ= expected inflation rateNum.3: The distinction between interest rates and returnsA: the return on a bond will not necessarily equal the yield to maturity on that bond.RET=i + g●The only bond whose return equals the initial yield to maturity isone whose time to maturity is the same as the holding period● A rise in interest rates is associated with a fall in bond prices,resulting in capital losses on bonds whose terms to maturity are longer than the holding period.●The more distant a bond's maturity, the greater the size of thepercentage price change associated with an interest -rate change.●The more distant a bond's maturity, the lower the rate of return thatoccurs as a result of the increase in the interest rate.●Even though a bond has a substantial initial interest rate, its returncan turn out to be negative if interest rates rise.Chapter 5 The Behavior of Interest Rates1.Liquidity : The ease and speed with which an asset can be turned intocash.2.market equilibrium : market equilibrium occurs when the amount thatpeople are willing to buy (demand) equals the amount that people are willing to sell (supply) at a given price.3.liquidity preference framework : determines the equilibrium interestrate in terms of the supply of and demand for money.4.opportunity cost : The amount of interest (expected return) sacrificedby not holding the alternative asset.5.excess supply : The quantity of bonds supplied exceeds the quantityof bonds demanded, is called a condition of excess supply.6.excess demand : the quantity demanded is greater than the quantitysupplied.Questions and answersNum.1 : Determining the quantity demanded of an asset.A:1) Wealth, the total resources owned by the individual, including all assets2) Expected return (the return expected over the next period)on one asset relative to alternative assets 91.3) Risk (the degree of uncertainty associated with the return)on one asset relative to alternative assets4) Liquidity (the ease and speed with which an asset can beturned into cash) relative to alternative assetsNum.2 : What’s the Theory of Asset Demand?A : l) The quantity demanded of an asset is positively related to wealth.2) The quantity demanded of an asset is positivelyrelated to its expected return relative to alternativeassets.3) The quantity demanded of an asset is negativelyrelated to the risk of its returns relative toalternative assets.4)The quantity demanded of an asset is positively relatedto its liquidity relative to alternative assets. Num.3 : Shifts in the Demand for Money1）Income Effect a higher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the right.2）Price-Level Effect a rise in the price level causes the demand for money at each interest rate to increase and the demand curve to shift to the right.Chapter 6 The Risk and Term Structure of Interest Rates1.Default-free bond : U.S. Treasury bonds have usually been consideredto have no default risk because the federal government can always increase taxes to pay of[ its obligations. Bonds like these with no default risk are called default-free bonds.2.Yield curve : A plot of the yields on bonds with differing terms tomaturity but the same risk, liquidity, and Lax considerations is called a yield curve.3.Credit-rating agency : investment advisory firms that rate the qualityof corporate and municipal bonds in terms of the probability of default.4.Preferred habitat theory : It assumes that investors have a preferencefor bonds of one maturity over another, a particular bond maturity (preferred habitat) in which they prefer to invest. Because they prefer bonds of one maturity over another, they will be willing to buy bonds that do not have the preferred maturity (habitat) only if they earn a somewhat higher expected return. Because investors are likely to prefer the habitat of short-term bonds over that of longer-term bonds.5.Liquidity premium theory : the interest rate on a long-term bond willequal an average of short-term interest rates expected to occur over the life of the long-term bond plus a liquidity premium (also referred to as a term premium) that responds to supply and demand conditions for that bond.6.Risk premium : The spread between the interest rates on bonds withdefault risk and default-free bonds, both of the same maturity, called the risk premium.Questions and answersNum.1:What is the Facts Theory of the Term Structure of Interest Rates Must Explain?A: 1) Interest rates on bonds of different maturities move together over time.2) When short-term interest rates are low, yield curves are more likely to have an upward slope; when short-term rates are high, yield curves are more likely to slope downward and be inverted .3)Yield curves almost always slope upwardNum.2: What is the three theories to explain the three facts?A: 1)Expectations theory explains the first two facts but not the third.2)Segmented markets theory explains fact three but not the first two.3) Liquidity premium theory combines the two theories to explain all three facts.Num.3:What is the preferred habitat Theory?A: 1) Investors have a preference for bonds of one maturity over another.2)They will be willing to buy bonds of different maturities only if they earn a somewhat higher expected return.3)Investors are likely to prefer short-term bonds over longer-term bonds.Chapter 7 The Stock Market, the Theory of Rational Expectations, and theEfficient Market Hypothesis1.Dividend : Dividends are payments made periodically, usually everyquarter, to stockholders.2.Rational expectations : Expectations will be identical to optimalforecasts (the best guess of the future) using all available information.3.Adaptive expectations: Expectations of inflation, for example, weretypically viewed as being an average of past inflation rates. This view of expectation formation, called adaptive expectations.4.The efficient market hypothesis : In these markets, people with betterforecasts of the future get rich. The application of the theory of rational expectations to financial markets (where it is called the efficient market hypothesis or the theory of efficient capital markets).5.Market fundamentals : Items that have a direct impact on future incomestreams of the securities6.Bubble : A bubble is a situation in which the price of an asset differsfrom its fundamental market value.Questions and answersNum.1: How the Market Sets Prices?A: 1)The price is set by the buyer willing to pay the highest price.2)The market price will be set by the buyer who can take best advantage of the asset3)Superior information about an asset can increase its value by reducing its risk.Num.2 : What is the Efficient Markets ?A: 1)Current prices in a financial market will be set so that the optimal forecast of a security’s return using all available information equals th e security’s equilibrium return.2)In an efficient market, a security’s price fully reflects all available information.Num.3:What’s the evidence in favor of Market Efficiency ?A: •Having performed well in the past does not indicate that an investment advisor or a mutual fund will perform well in the future •If information is already publicly available, a positive announcement does not, on average, cause stock prices to rise •Stock prices follow a random walk•Technical analysis cannot successfully predict changes in stock prices。
