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February 24, 2005

Exchange Rates

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Interest Rate Parity

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Posted by bparke at 07:25 PM | Comments (0)

February 22, 2005

Tues (no camera!)

Posted by bparke at 09:32 PM | Comments (0)

February 17, 2005

The Term Structure of Interest Rates

Events in the Wall Street Journal compelled us to talk about the term structure of interest rates a little early this semester. We begin with the definition of a forward rate.

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The forward rate of 5% turns 103 in 2006 into 108.16 in 2007.

The expectations hypothesis recasts this algebra to state that the current long-term rate is determined by the current short-term rate and the expected future short-term rate. The empirical rates include some component of the spread between short-term and long-term rates that can be identified as a risk premium. One of the risk is, of course, the possibility of higher future short-term rates so disentangling these concepts is difficult.

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Posted by bparke at 10:18 PM | Comments (0)

Investing in Education

We used a production possibility frontier to demonstrate two points:

1. Having access to financial markets can cause people to invest more in education than they would without that access.

2. Lowering the interest rate on student loans will encourage even more investment in education.

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On Tuesday, 2/22, we also investigated a discrete choice to invest in four years of college, emphasizing the role of growth in incomes. The pictures of this analysis are missing because I forgot my camera. I will fix this at some point.

Posted by bparke at 09:34 PM | Comments (0)

February 15, 2005

Saving for Retirement

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Posted by bparke at 10:31 PM | Comments (0)

Intertemporal Substitution

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Posted by bparke at 09:30 PM | Comments (0)

February 10, 2005

Stock Pricing

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Posted by bparke at 11:27 PM | Comments (0)

Investment

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Posted by bparke at 11:23 PM | Comments (0)

February 03, 2005

Mortgages

On 2/3 and 2/8, we discussed mortgages.

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Posted by bparke at 11:13 PM | Comments (0)

February 01, 2005

Bonds

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Posted by bparke at 11:08 PM | Comments (0)