Lesson 10: Economics & Monetary Policy Flashcards
Yield Curve
graphs interest rates against time to maturity
Normal YC
longer treasuries have higher yield than short (most common)
____________
Inverted YC
Longer term treasuries have a LOWER yield curve than short term
(signals recession)
Flat YC
Long and Short term treasury yields are similar
(signals economic transition)
Fed Funds Rate
Lowest IR, rate that banks charge each other for overnight loans
Discount Rate
This is the 2nd lowest rate, and its the rate the Fed charges banks for short term loans
Broker Call Rate
rate BDs borrow from banks that it relends to customers as margin loans
Prime Rate
Rate banks charge their most creditworthy institutional customers
Income Statement
revenues, expenses, and net incomes
over a period of time (Quarterly/annual)
Balance Sheet
Assets, liabilities, shareholder equity
as of a moment in time (Q end/year end)
Cash Flow Statement
Sources & uses of cash
over a period of time(quarterly/annual)
Working Capital
Calculated from balance sheet:
current assets - current liabilities
Current Assets
Cash and other assets that are expected to be cash within one year
Current Liabilities
Obligations (payments) due within one year
Exchange Rates
How much one currency is worth in terms of a nother
Purchasing Power Parity
helps determine ERs by comparing how much it would cost to buy the same basket of goods in different currencies
Who wants a strong US dollar
People who have revenues in $$
US importers & Foreign exporters
Who wants a weak US dollar
People who have expenses in $$
US Exporters & Foreign Importers
