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| Determinants of Interest Rates | |
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| Federal Reserve | |
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| Foreign Central Banks | |
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| Loanable Funds Approach | |
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| Inflation and Interest Rates | |
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| Summary | |
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| Questions and Problems | |
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| Issuers | |
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| The US Treasury | |
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| Index-Linked Bonds | |
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| Municipalities | |
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| Corporations | |
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| Government Agencies | |
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| Mortgages | |
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| Summary | |
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| Questions and Problems | |
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| Financial Intermediaries | |
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| Initial Sale of Securities (Primary Market) | |
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| Dealers and Brokers (Secondary Market) | |
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| Mutual Funds | |
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| Insurance Companies | |
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| Pension Funds | |
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| Commerical Banks and Thrifts | |
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| Comparing Types of Debt Financing | |
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| Summary | |
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| Questions and Problems | |
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| Time Values (Flat Term Structure) | |
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| A Time Line | |
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| Future Value | |
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| Present Value | |
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| Price of a Bond | |
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| Bond Yield to Maturity | |
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| Other Yield Measures | |
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| Perpetual Bonds | |
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| Holding Period Returns | |
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| Semiannual Interest | |
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| Accrued Interest | |
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| Newspaper Quotes | |
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| Summary | |
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| Questions and Problems | |
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| Money Market Instruments and Rates | |
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| Money Market Instruments | |
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| Money Market Rates | |
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| Summary | |
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| Questions and Problems | |
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| The Risk of Changing Interest Rates | |
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| Duration | |
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| Immunization at a Horizon Date | |
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| Immunizing Assets and Liabilities | |
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| Summary | |
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| Questions and Problems | |
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| Appendix | |
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| Time Value with Nonflat Term Structure | |
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| Spot Interest Rates | |
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| Present Value or Spot Prices | |
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| Treasury Strips | |
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| Forward Interest Rates | |
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| Shape of the Term Structure | |
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| Annuities | |
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| Prices of Coupon-Bearing Bonds | |
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| Yield to Maturity and Spot Rates | |
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| Summary | |
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| Questions and Problems | |
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| Arbitrage | |
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| Shortselling | |
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| Conditions for Arbitrage | |
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| Arbitrage and Present Values | |
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| Arbitrage and Bond Coupons | |
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| An Example of a Replicating Portfolio | |
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| Creating Forward Contracts from Spot Securities | |
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| Arbitrage and Forward Interest Rates | |
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| Summary | |
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| Questions and Problems | |
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| Term Structure of Interest Rates | |
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| Historical Patterns in Yield Curves | |
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| Segmented Markets Theory | |
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| Increasing Liquidity Premiums | |
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| Preferred Habitat | |
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| Money Substitute | |
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| Expectations Hypothesis | |
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| Combined Theory | |
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| Humpbacked Curves | |
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| Holding Period Returns | |
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| Summary | |
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| Questions and Problems | |
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| Default Risk | |
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| Default on Municipal Bonds | |
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| Default on Mortgages | |
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| Corporate Bonds | |
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| Bonds Ratings | |
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| High-Yield (Junk) Bonds | |
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| Summary | |
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| Questions and Problems | |
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| Put and Call Options | |
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| Call Options | |
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| Put Options | |
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| Put-Call Parity | |
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| Determinants of the Value of a Call Option | |
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| Embedded Options | |
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| Summary | |
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| Questions and Problems | |
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| Mortgages | |
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| Mortgage Mathematics | |
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| Variable-Rate Mathematics | |
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| Assumable Mortgages | |
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| The Prepayment Option | |
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| Marketable Mortgages | |
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| Default and Mortgage Guarantees | |
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| Derivative Mortgage Products | |
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| Summary | |
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| Questions and Problems | |
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| Futures Contracts | |
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| Open Interest | |
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| Marking and Marketing-to-Market | |
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| Forward versus Futures Contracts | |
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| Determinants of Futures Prices | |
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| Speculative Futures Positions | |
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| Hedging with Futures Contracts | |
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| Summary | |
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| Questions and Problems | |
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| Bond Futures | |
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| Treasury Bond Futures | |
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| Hedging with Financial Futures | |
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| Cheapest Delivery Bond | |
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| Other Aspects of the Delivery Process | |
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| Summary | |
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| Questions and Problems | |
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| Other Derivatives | |
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| Floating-Rate Notes | |
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| Interest Rate Swaps | |
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| Convertible Bonds | |
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| LYONs | |
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| Preferred Stock | |
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| Summary | |
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| Questions and Problems | |
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| Exchange Rates and Investment Returns | |
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| International Investment | |
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| Exchange Rates | |
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| Impact of Changing Exchange Rates on Imports and Exports | |
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| Exchange Rates and Investment Returns | |
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| Inflation, Interest Rates, and Exchange Rates | |
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| Covered Interest in Arbitrage | |
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| Time Series Properties of Interest Rates | |
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| International Bond Markets | |
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| Summary | |
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| Questions and Problems | |