67 vol. 2‚ 2012 TARGETING OF KEY INTEREST RATE AS A SOURCE OF CRISIS YANA SOKOLOVA St. Petersburg State University‚ Faculty of Economics‚ Russia Abstract In response to the world economic crisis of 2008 the authorities of many countries have launched policies of interest rate reduction through large-scale asset purchases on the open key rate targeting. The author explains how changes of the federal funds rate increased bank interest rate risk and provoked the recession of 2007-2009
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ECONOMICS PROJECT REPORT ON INTEREST RATES AND INDUSTRIAL GROWTH (2009-10 to 2011-12) Submitted By: Mohana Goel (12DM077) Mohit Bhola (12DM078) Nidhi Dalal (12DM090) Nishant Raj (12DM097) Nishtha Chugh (12DM098) Piyush Chib (12DM102) CONTENTS 1. INDIAN ECONOMY:Overview 2. INTEREST RATES 3.1. MEANING 3.2. REAL vs NOMINAL INTERST RATES 3.3. TYPES OF INTEREST RATES 3.4. EFFECT OF INTEREST RATE RISE 3. MONETARY POLICY 4.5. MEANING 4
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bond in August for a period of 6 months. Zero-coupon bond of similar quality is currently yielding 4%‚ a cost‚ which the treasurer finds acceptabl(e) The treasurer is of the view that interest rate will rise before the company will issue the debt‚ hence will increase the cost of debt. So to hedge the interest rate risk the treasurer decided to hedge the risk using September Eurodollar futures contract. September 90-day Eurodollar futures contracts are currently trading at 96.25. You are required
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Bank of Canada and Interest Rates Bank of Canada Will Raise Interest Rates The Bank of Canada has indicated that it has concerns over inflation being too low. (Parkinson). However‚ inflation has been rising and the Canadian economy has strengthened over the last several months. Keeping interest rates too low over a long period of time may have a tendency to over-inflate the economy and create asset bubbles while also creating pockets of greater debt‚ not dissimilar to those that contributed to
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The Case for Wal-Mart Is Wal-mart the ideal store to shop it? Austrian economic and business professional Karen De Coster and banker Brad Edmonds believe that Wal-mart improves the lives of people in rural areas because it gives them access to a lifestyle that they would not have if Wal-mart did not exist. Karen De Coster is a freelance writer she is a graduate student in Austrian economics‚ and is also a business professional from Michigan. Although she has not finished her first book
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Major Determinants of Interest Rates Inflation Inflation is a factor that decisively affects the nature or outcome of interest rates. “Inflation is an increase in prices of goods and services over time”(Financial Institutions‚ Instruments and Markets‚ 2012). Inflation is the natural byproduct of a robust‚ growing economy. No inflation‚ or deflation (the lowering of prices)‚ is actually a much worse economic indicator. Also‚ in a healthy economy‚ wages rise at the same rate as prices. A standard
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1) A $100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year. 2) An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment? 3) Which of the following investments has a larger future value? A $100 investment
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ACCRUAL SWAPS AND RANGE NOTES PATRICK S. HAGAN BLOOMBERG LP 499 PARK AVENUE NEW YORK‚ NY 10022 PHAGAN1@BLOOMBERG.NET 212-893-4231 Abstract. Here we present the standard methodology for pricing accrual swaps‚ range notes‚ and callable accrual swaps and range notes. Key words. range notes‚ time swaps‚ accrual notes 1. Introduction. 1.1. Notation. In our notation today is always t = 0‚ and (1.1a) D(T ) = today’s discount factor for maturity T. For any date t in the future‚ let Z(t; T ) be the
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What is the rule of 72? Well… here’s the equation: Years to double = 72 / Interest rate DO NOT reread this equation. The rule of 72 is a hard rule to explain. I will do my best to try to explain it. The answer to ‘rule of 72’ gives us a number of years. This number of years tells us how long it takes to double our money. Let’s say you have 100 dollar. The ‘rule of 72’ helps us figure out how long it will take to have 200 dollars. Scenario 1: You have invested your 100 dollars in a 3%
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Structure of the Analysis Design The experiment wants to compare the steady state level of the economy for all the models‚ which is considered the baseline case‚ in period 0‚ to a state where the economy experiences an unanticipated scal or monetary shock‚ in period 1. The monetary shocks considered are shocks to the interest rate reaction function equal to 1% compared to the steady-state value for one year. The temporary scal policy shocks correspond to an increase in spending or a decline in
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