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Exploring Interest Rates and Investments in Capital Markets

Delve into the impact of annual compounding, future and present value calculations, and market equilibrium on investments. Explore the dynamics of capital markets and the interplay of interest rates with investments.

zachery-shepherd
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Exploring Interest Rates and Investments in Capital Markets

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  1. Chapter 16 Interest Rates, Investments, and Capital Markets

  2. Table 16.01 Interest and the Frequency of Compounding

  3. Table 16.02 Future Value, FV, to which $1 Grows by the End of Year t at Various Interest Rates, i, Compounded Annually,$

  4. Table 16.03 Present Value, PV, of a Payment $1 at the End of Year t at Various Interest Rates, i, Compounded Annually,$

  5. Figure 16.01 Present Value of a Dollar in the Future Present value, PV , of $1 $1 i = 0% 90 80 70 60 50 40 30 20 10 i = 10% i = 5% = 20% i 0 10 20 30 40 50 60 70 80 90 100 t , Years

  6. Table 16.04 Present value, PV of a Flow of $10 a Year for t Years at Various Interest Rates, i, Compounded Annually,$

  7. Figure 16.02 Annual Earnings of High School and College Graduates Annual earnings, Thousands of 1995 dollars 40 Benefit College graduate 30 20 High school graduate 10 Cost 0 – 10 18 22 30 40 50 60 70 Age, Years

  8. Table 16.05 Present Value of Earnings

  9. Figure 16.03 Price of an Exhaustible Resource p , $ per unit _ p Price p 1 m 1 T Time, Years

  10. Table 16.06 Price and Quantity of Coal Reflecting the Amount of Coal and the Interest Rate

  11. Figure 16.04 First-Year Price in a Two-Period Model First-year price of coal, p , $ per pound 1 190.48 150 100 50 0 100 200 300 400 Q , Amount of coal in the ground

  12. Figure p16.01 Redwood Trees Real price of old-growth redwoods 300 250 200 150 100 50 0 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983

  13. Figure 16.05 Price of Oil over Time Real price of crude oil 10 8 6 4 2 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

  14. Figure 16.06 Capital Market Equilibrium Interest rate, 1 S i , % per year 2 S e 1 i 1 e 2 i 2 D Q Quantity of funds per year Q 1 2

  15. Figure 16.07 How Government Borrowing Squeezes Out Private Investment (a) Private Sector (b) Government (c) Market i , % per year i , % per year i , % per year S D p 2 D g 1 D g e i i i 2 2 2 2 i i i e 1 1 1 1 2 D 1 D 1 2 2 1 1 2 Q Q Q Q Q Q p p g g Quantity of funds per year Quantity of funds per year Quantity of funds per year

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