Audience

Business students and employees seeking a broad understanding of the development and operation of American financial institutions

Prerequisites

An understanding of basic economics

Course Aim

To explain the relationship between supply, demand, and interest rates

Learning Objectives

Describe the interest payments on different credit market instruments. Calculate the yield to maturity. Calculate current yield and yield on a discount basis. Calculate the rate of return on a security. Discuss nominal and real interest rates. Describe the influence of wealth, expected return, risk, and liquidity on the demand for an asset. Explain how to risk is reduced by diversifying a portfolio. Predict how changes in interest rates and price affect the supply of and demand for bonds. Indicate the effects of business cycles and inflation on bond market equilibrium. Determine how economic parameters have changed and their effect on the supply of and demand for bonds. Discuss the liquidity preference framework. Explain changes in equilibrium interest rates in monetary terms.

Topics Covered

Interest Rates - Interest and credit market instruments - Yield to maturity - Other measures of interest rates - Interest rates and returns - Real and nominal interest rates Portfolio Choice - Asset demand - Risk diversification Loanable Funds Framework - Supply and demand in the bond market - Shifts in bond demand and supply - Changes in bond market equilibria - Hands-on: Analyzing demand and supply for bonds Liquidity Preference Framework - Money supply and demand - Money and interest rate equilibrium

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