TAILIEUCHUNG - Lecture Money and capital markets: Chapter 8 - Peter Rose, Milton Marquis
Chapter 8 - The risk structure of interest rates: Defaults, prepayments, taxes, and other rate-determining factors. In this chapter, students will be able to see the effects of financial assets’ marketability, liquidity, default risk, call privileges, prepayment risk, convertibility and taxability upon their interest rates and prices; to understand why there are so many different interest rates within the global economy; to learn how the “structure of interest rates” is built and why it changes constantly. | Chapter 8 The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors Learning Objectives To see the effects of financial assets’ marketability, liquidity, default risk, call privileges, prepayment risk, convertibility and taxability upon their interest rates and prices. To understand why there are so many different interest rates within the global economy. To learn how the “structure of interest rates” is built and why it changes constantly. Learning Objectives To see why it is so difficult to forecast interest rates and financial asset prices accurately. Introduction In the preceding chapter, we examined how expected inflation and security maturity affect interest rates. In this chapter, we will look at how some other factors influence interest rates: marketability, default risk, call privileges, taxation of security income, prepayment risk, convertibility. Marketability Marketability – Can an asset be sold quickly? .
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