Links Shlaes,The Forgotten Man- Chapters 10 and 11

M&B Text - Chapters 4, 5 & 6

A Brief History of Lending [This is an updated link, posted 10/12 @ 4 p.m.]:

https://www.fundingcircle.com/us/resources/history-of-lending/

The Morality of Moneylendings (IntroductionandAristotlesections; jump to the end for21st CenturyandConclusionsections):

https://www.theobjectivestandard.com/issues/2007-fall/morality-of-moneylending/

Skim over this Freddie Mac 30 year fixed mortgage history table:

http://www.freddiemac.com/pmms/pmms30.htm

Seven centuries of interest rates (Market Watch):

https://tinyurl.com/tjd8br3

The Absudity of Negative Interest Rates:

https://mises.org/wire/absurdity-negative-interest-rates

25true/false &..(@1pt. for15plus10bonus for25pointstotal) Module 10 reading.

1.According to the text, interest can be interpreted as the opportunity cost of money.

2.There are several ways to measure interest, but the most useful is the yield to maturity.

3.The nature of interest reflects the fact that $1 today (holding all other factors constant) is worthlessus than $1 in the future.

4.Unlike a fixed-payment loan, a simple loan will require periodic payments over the life of the loan.

5.If the coupon on a $1000 bond was $70 and the market price for this bond was $1000, we would know that the relevant market rate of interest was 7%.

6.The Fisher Equation is the formula that relates nominal interest rates to real interest rates and is named forFrencheconomist named FisherPrice.

7.The two theories of why interest rates change that are presented in the text are the asset demand theory and the liquidity preference theory.

8.If you are risk-aversethis means thatyou willnottake on additional riskfor a financial instrument even ifit carries a very large additional return.

9.If inflationary expectations rise, then the quantity demanded of bonds will fall.

10.The liquidity preference model, which looks at the supply and demand for money, shows the equilibrium real rate of interest (r).

11.During the 1920s, the authors of the text claim that falling interest rates were reflecting the positive business environment which would be expected to increase the demand for bonds.

12.The "flight to quality" will raise the price of low rated bonds and lower the price of high rated bonds.

13.Even holding risk constant, bonds of different maturities are not perfect substitutes for one another.

14.Under normal conditions we expect the yield curve to be inverted.

15.The Code of Hammurabi outlined many laws including the regulation of interest charged on loans made with silver.

16.An "adesha" is one of the earliest known examples of a bill of exchanged and used in ancient Babylon.

17.Brook notes with some irony that while major thinkers like Aquinas and Adam Smith considered money lending to be a vice, popular novelists like Dickens and Dostoyevsky extolled the virtues of this activity.

18.The term "usury" is strictly defined only as earning interest on money lent out, although many people use the term to describe "excessive interest," according to Brook.

19.Brook relates to us a report about how, after payday loans were made illegal in Georgia, that desperate borrowers traveled to other states to acquire these funds.

20.Since 1971 the 30 year mortgage interest rate first exceeded 10% in December of 1978.

21.For the entire decade of the 1980s (1980 to 1989), the average 30 year mortgage rate of interest exceeded 10%.

22.Over the past 700 years, Schmelzing estimates that the average world real (risk free) interest rate was 3.78%.

23.According toSchmelzing'schart, the highest risk-free real rates of interest over the past 700 years was in the mid-1400s.

24.The European Central Bank (in 2015) lowered its interest rate on bank deposits (held at the ECB) to -4%.

25.The purpose of negative interest rates seems to be to spur banks to lend more.