企業(yè)財務知識資料

CHAPTER5

TheFinancialEnvironment:

Markets,Institutions,

andInterestRatesFinancialmarketsTypesoffinancialinstitutionsDeterminantsofinterestratesYieldcurvesDefineTheseMarketsMarketsingeneralPhysicalassetsFinancialassetsMoneyvs.CapitalPrimaryvs.SecondarySpotvs.FutureDirecttransferInvestmentbankinghouseFinancialintermediaryThreePrimaryWaysCapitalIsTransferredBetweenSaversandBorrowersBankName

Country

TotalassetsDeutscheBankAG Germany $735billionUBSGroup Switzerland $687billionCitigroup UnitedStates $669billionBankofAmerica UnitedStates $618billionBankofTokyo Japan $580billionTheTop5BankingCompanies

intheWorld,1999PhysicalLocationStockExchangesvs.ElectronicDealer-BasedMarketsAuctionmarketvs.Dealermarket(Exchangesvs.OTC)NYSEvs.NasdaqsystemDifferencesarenarrowingWhatdowecalltheprice,orcost,ofdebtcapital?TheinterestrateWhatdowecalltheprice,orcost,ofequitycapital?RequiredDividendCapitalreturnyieldgain=

+Whatfourfactorsaffectthecostofmoney?ProductionopportunitiesTimepreferencesforconsumptionRiskExpectedinflation“Real”Versus“Nominal”Ratesk*=Realrisk-freerate.T-bondrateifnoinflation;1%to4%.=Anynominalrate.=RateonTreasurysecurities.kkRFk=k*+IP+DRP+LP+MRP.Here:k = requiredrateofreturnona debtsecurity.k* = realrisk-freerate.IP = inflationpremium.DRP = defaultriskpremium.LP = liquiditypremium.MRP = maturityriskpremium.PremiumsAddedtok*forDifferentTypesofDebtS-TTreasury:onlyIPforS-TinflationL-TTreasury:IPforL-Tinflation,MRPS-Tcorporate:S-TIP,DRP,LPL-Tcorporate:IP,DRP,MRP,LPWhatisthe“termstructureofinterestrates”?Whatisa“yieldcurve”?Termstructure:therelationshipbetweeninterestrates(oryields)andmaturities.Agraphofthetermstructureiscalledtheyieldcurve.TreasuryYieldCurve051015102030YearstoMaturityInterestRate(%)

1yr5.2%5yr5.8%10yr5.9%30yr6.0%YieldCurve(August1999)YieldCurveConstructionStep1:Findtheaverageexpected inflationrateoverYears1ton:IPn=.nSuppose,thatinflationisexpectedtobe5%nextyear,6%thefollowingyear,and8%thereafter.IP1 =5%/1.0=5.00%.IP10 =[5+6+8(8)]/10=7.50%.IP20 =[5+6+8(18)]/20=7.75%.

MustearntheseIPstobreakevenvs.inflation;theseIPswouldpermityoutoearnk*(beforetaxes).Step2:FindMRPBasedonThis Equation:MRPt=0.1%(t–1).MRP1 =0.1%x0 =0.0%.MRP10 =0.1%x9 =0.9%.MRP20 =0.1%x19 =1.9%.Step3:AddtheIPsandMRPstok*:kRFt=k*+IPt+MRPt.kRF = Quotedmarketinterest rateontreasurysecurities.Assumek*=3%:

kRF1 =3.0%+5.0%+0.0%=8.0%. kRF10 =3.0%+7.5%+0.9%=11.4%. kRF20 =3.00%+7.75%+1.90%=12.65%.HypotheticalTreasuryYieldCurve05101511020YearstoMaturityInterestRate(%)

1yr8.0%10yr11.4%20yr12.65%Realrisk-freerateInflationpremiumMaturityriskpremiumWhatfactorscanexplaintheshapeofthisyieldcurve?Thisconstructedyieldcurveisupwardsloping.Thisisduetoincreasingexpectedinflationandanincreasingmaturityriskpremium.WhatkindofrelationshipexistsbetweentheTreasuryyieldcurveandtheyieldcurvesforcorporateissues?CorporateyieldcurvesarehigherthanthatoftheTreasurybond.However,corporateyieldcurvesarenotneces-sarilyparalleltotheTreasurycurve.ThespreadbetweenacorporateyieldcurveandtheTreasurycurvewidensasthecorporatebondratingdecreases.HypotheticalTreasuryand

CorporateYieldCurves051015015101520YearstomaturityInterestRate(%)5.2%5.9%6.0%TreasuryyieldcurveBB-RatedAAA-RatedHowdoesthevolumeofcorporatebondissuescomparetothatofTreasurysecurities?Recently,thevolumeofinvestmentgradecorporatebondissueshasovertakenTreasuryissues.‘95‘96‘97‘98‘99600450300150GrossU.S.TreasuryIssuance(inblue)InvestmentGradeCorporateBondIssuance(inred)BillionsofdollarsThePureExpectationsHypothesis(PEH)Shapeoftheyieldcurvedependsontheinvestors’expectationsaboutfutureinterestrates.Ifinterestratesareexpectedtoincrease,L-TrateswillbehigherthanS-Tratesandviceversa.Thus,theyieldcurvecanslopeupordown.PEHassumesthatMRP=0.Long-termratesareanaverageofcurrentandfutureshort-termrates.IfPEHiscorrect,youcanusetheyieldcurveto“backout”expectedfutureinterestrates.ObservedTreasuryRatesMaturity1year2years3years4years5yearsYield6.0%6.2%6.4%6.5%6.5%IfPEHholds,whatdoesthemarketexpectwillbetheinterestrateonone-yearsecurities,oneyearfromnow?Three-yearsecurities,twoyearsfromnow?01256.0%34x%6.2%PEHtellsusthatone-yearsecuritieswillyield6.4%,oneyearfromnow(x%).

6.2% =12.4% =6.0+x%6.4% =x%.(6.0%+x%)201256.2%34x%6.5%[2(6.2%)+3(x%)]5PEHtellsusthatthree-yearsecuritieswillyield6.7%,twoyearsfromnow(x%).

6.5% =32.5% =12.4%+3(x%)20.1% =3(x%)6.7% =x%.SomearguethatthePEHisn’tcorrect,becausesecuritiesofdifferentmaturitieshavedifferentrisk.Generalview(supportedbymostevidence)isthatlenderspreferS-Tsecurities,andviewL-Tsecuritiesasriskier.Thus,investorsdemandaMRP