金融英語(yǔ)chapter 1

1、Financial English金融英語(yǔ)Course Structure Chapter 1 Money, the Interest Rates and the Financial System Chapter 2 Central Bank Chapter 3 Commercial Bank Chapter 4 Investment Bank Chapter 5 Money MarketCourse Structure Chapter 6 Capital Market Chapter 7 Foreign exchange Market Chapter 8 The Balance of Int

2、ernational Payments Chapter 9 International Settlements Chapter 10 Risk and InsuranceBenefits Financial English course will provide you with: - Improve the financial vocabulary - Understand basic definitions and business proceduresBenefits - Greater confidence when discussing financial documents and

3、 data - Increased verbal fluency for face-to-face negotiations - The confidence to produce professional written reports in English - Key financial English terminologyTherefore to Prepare for further learning, for example, academic English readings during master programRequirements Attendance 10% Ass

4、ignment 10% Presentation 10% Exam 70% Total 100%Requirements Attendance 20% Assignment 20% Exam 60% Total 100%Chapter 1 Money, the Interest Rates and the Financial SystemPart 1 Money 1.Origin of Money 2.Definition of Money 3.Functions of Money 4.Forms of MoneyQuestions What is money? When did money

5、appear? What are the functions of money? What are the types of money? How can we measure money?Question When you buy a pair of jeans or a CD, for example, you never wonder whether the merchant will accept the bills and coins in your wallet as payment. But suppose money didnt exist. How would you pay

6、 for the things you want to buy?1.Origin of Money Barter exchange goods with goods. Such as: Goat, stone, ox, salt, shell,peal, jade,iron, Disadvantages of Barter Deterioration Indivisibility Inefficient and Protracted (rate of exchange) Double coincidence of wants silver, gold overcame such shortco

7、mings13 century A.D.Paper currency (fiat money)Bill of exchangePromissory NoteCheque/checkCommodity money Precious metals like gold and silverExchange for GBP1,250.00 Beijing,1 April,2003At sight pay to the order of DEF Co.the sum of Pounds one thousand two hundred and fifty onlyTo XYZ Bank, For ABC

8、 Co., Beijing London (signature) End of 18 centuryExpensiveRiskyTurnover of funds slowForeign exchange bankEvolution of Money Paper currency (fiat money) ( intrinsically worthless) Fiat money has not only no particular value in use; it doesnt even really have a value in exchange except that which is

9、 decreed that it would have. Checks 18th century Electronic means of payment credit card.2.Definition of Money Question 1: What is money? see p1,p9 Money can be described as any commodity or token that is generally acceptable as a means of payment for goods or services or in the repayment of debt. 貨

10、幣是普遍作為支付手段接受的任何一種商品或符號(hào)。 Can you list some kinds of money? Paper cash, coins2.Definition of Money Question 2: Do you know currency and money? Currencyconsisting of dollar bills and coins, is one type of money. And there are other types of money are not currency, such as check, saving deposits.2.Defin

11、ition of Money Question 3: Do you know the difference between wealth and money? Wealth means great amount of property, money, etc. (1)In the private sense, all property which has a money value. (2) In the public sense, all objects, esp. material objects, which have economic utility. Can you list som

12、e kinds of wealth do not belong to money? Art, houses, stocks, bonds, cars, jewels2.Definition of Money Question 4: Do you know the difference between income and money? Income is a flow of earnings per unit of time; Money is a stock: it is a certain amount at a given point in time.Additional questio

13、n What is difference between revenue and income? For corporations, revenues minus cost of sales, operating expenses, and taxes, over a given period of time. Functions of money Medium of exchange Unit of account Store of valueMedium of exchange In almost all market transactions in our economy, money

14、in the form of currency or checks is a medium of exchange; it is used to pay for goods and services. The use of money as a medium of exchange promotes economic efficiency by eliminating much of the time spent in exchanging goods and services.Medium of exchange The time spent trying to exchange goods

15、 or services is called a transaction cost. In a barter economy, transaction costs are high because people have to satisfy a “double coincidence of wants”they have to find someone who has goods or service they want and who also wants the goods or service they have to offer.Medium of exchange Money is

16、 therefore essential in an economy it is a lubricant that allows the economy to run more smoothly by lowering transaction costs, thereby encouraging specialization and the division of labor.Unit of account The second role of money is to provide a unit of account; that is, it is used to measure value

17、 in the economy. We measure the value of goods and services in terms of money, just as we measure weight in terms of pounds or distance in terms of miles.Store of value Money also functions as a store of value: it is a repository of purchasing power over time. It is an asset. Its something that we c

18、an use to store value away to be retrieved at a later point in time. So we can not consume today, we can hold money insteadand transfer that consumption power to some point in the future. Is money the only choice we have to store value? They often pay the owner a higher interest rate than money, exp

19、erience price appreciation, and deliver services such as providing a roof over ones head. If these assets are a more desirable store of value than money, why do people hold money at all? Liquidity The relative ease and speed with which an asset can be converted into a medium of exchange. Liquidity L

20、iquidity is highly desirable. Money is the most liquid asset of all because it is the medium of exchange; it does not have to be converted into anything else in order to make purchases. Other assets involve transaction costs when they are converted into money. Simply speaking Money is a medium of ex

21、change accepted by the community, meaning its what people buy things with and sell things for. Money provides a standard for measuring value (unit of account), so that the worth of different goods and services can be compared. money is a store of value that can be saved for later purchases. The Mone

22、tary Aggregates M0 現(xiàn)金(currencypaper money and coins) M1 狹義貨幣供應(yīng)量=M0+活期存款(demand deposit) M2 廣義貨幣供應(yīng)量=M1+定期存款(time deposit)+儲(chǔ)蓄存款(savings deposit)+其他存款+貨幣市場(chǎng)共同基金 M3=M2+大額定期存款和期限存款M0 現(xiàn)金(currencypaper money and coins) The bills and coins that we use today are known as currency 我們今天所用的紙幣和硬幣通稱為現(xiàn)金。 Deposits a

23、t banks and other financial institutions are also money because they can be converted into currency and because they are used to settle debts 在銀行和其他金融機(jī)構(gòu)的存款也是貨幣，因?yàn)樗鼈兛梢宰優(yōu)楝F(xiàn)金和用于結(jié)清債務(wù)。 M1 狹義貨幣供應(yīng)量=M0+活期存款(demand deposit) M1 consists of currency and travelers checks plus checking deposits owned by individua

24、ls and businesses and it does not include currency held by banks，and it does not include currency and checking account owned by the government M1包括個(gè)人與企業(yè)擁有的現(xiàn)金和旅行支票加支票存款，M1不包括銀行持有的現(xiàn)金，也不包括政府所擁有的現(xiàn)金和支票存款。M2 M2 consists of M1 plus savings deposits，time deposits，money market mutual funds，and other，deposits

25、 M2包括M1加儲(chǔ)蓄存款、定期存款、貨幣市場(chǎng)共同基金，以及其他存款。M3 M3, which consists of M2 plus largescale time deposits and term deposits M3包括M2加大額定期存款和期限存款。 大額定期存款存款單有一定的最低額，例如美國(guó)的美元可轉(zhuǎn)讓存款單為10萬(wàn)美元，倫敦的英鎊可轉(zhuǎn)讓存款單為5萬(wàn)英磅，金額的最小單位為千，故又稱大額存單。 期限存款的期限一般較長(zhǎng)，如教育儲(chǔ)蓄等 Interest rates are among the most closely watched variables in the economy. Th

26、eir movements are reported almost daily by the news media because they directly affect our everyday lives and have important consequences for the health of the economy.Part 2 Interest and IRIntroduction They affect personal decisions such as whether to consume or save, whether to buy a house, and wh

27、ether to purchase bonds or put funds into a saving account. Interest rates also affect the economic decisions of businesses and households, such as whether to use their funds to invest in new equipment for factories or to save their money in a bank. Essence of Interest Types of Interest Rates Calcul

28、ation of Interest Determinants of Interest Rates Functions of Interest Rates The Structure of Interest RatesEssence of Interest The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal “假如一個(gè)人在不論自己如何需假如一個(gè)人在不論自己如何需要，在到期之前也不得要求償

29、還要，在到期之前也不得要求償還的條件下，借出自己的貨幣，則的條件下，借出自己的貨幣，則他對(duì)自己所受到的他對(duì)自己所受到的不方便不方便可以索可以索取補(bǔ)償，這是不成問(wèn)題的。這種取補(bǔ)償，這是不成問(wèn)題的。這種補(bǔ)償，我們通常叫做利息。補(bǔ)償，我們通常叫做利息。” 英國(guó)政治經(jīng)濟(jì)學(xué)創(chuàng)始人英國(guó)政治經(jīng)濟(jì)學(xué)創(chuàng)始人威廉威廉配第配第(William Petty，1623-1687) What is Interest Rate? The interest rate is the yearly price charged by a lender to a borrower in order for the borrower

30、to obtain a loan. This is usually expressed as a percentage of the total amount loanedIR and Yield Unit of interest level Prior-factor Rate of return Post-factorTypes of Interest Rate Average interest rate and basis interest rateAR usually is for theoretical analysisBR is the foundation of all other

31、 kinds of interest rate Fixed rate and floating rateFR doesnt change during the loan term, easy for calculating cost and profitFLR changes during the loan term under certain conditions, usually half year once.Types of Interest Rate The official interest rate and market interest rate Set by different

32、 parties, market or government General interest rate and prime interest rateDifferent loan objects, Discount Government Loan Nominal interest rate and real interest rateInflationInflation When the amount of money circulating grows faster than the rate at which goods and services are produced, the re

33、sult is inflation. inflationtoo much money chasing too few goods. Hyperinflationa rapid rise in prices that seriously damages a countrys economy.Inflation It creates an inefficient price system It also distorts decision-making, reduces productivity and lowers the economys long-term rate of growth. I

34、t results in lower living standards for everyoneInflation So far in our discussion of interest rates, we have ignored the effects of inflation on the cost of borrowing. What we have up to now been calling the interest rate makes no allowance for inflation, and it is more precisely referred to as the

35、 nominal interest rate, which is to distinguish it from the real interest rate, the interest rate that is adjusted by subtracting expected changes in the price level so that it more accurately reflects the true cost of borrowing.Inflation The real interest rate is more accurately defined by the Fish

36、er equation. It states that the nominal interest rate i equals the real interest rate I plus the expected rate of inflation X . The real interest rate is likely to be a better indicator of the incentives to borrow and lend. When the real interest rate is low, there are greater incentives to borrow a

37、nd fewer incentives to lend. 名義利率和真實(shí)利率的關(guān)系名義利率和真實(shí)利率的關(guān)系 假定某年度物價(jià)沒(méi)有發(fā)生變化，某人從其他假定某年度物價(jià)沒(méi)有發(fā)生變化，某人從其他人那里獲得一年期的人那里獲得一年期的100萬(wàn)元貸款，年利息萬(wàn)元貸款，年利息額為額為5萬(wàn)元，則名義利率和實(shí)際利率相同，萬(wàn)元，則名義利率和實(shí)際利率相同，都是都是5%。 如果某一年的通脹率為如果某一年的通脹率為10%，為了避免通脹，為了避免通脹給本金帶來(lái)的損失，假設(shè)債權(quán)人依然要獲得給本金帶來(lái)的損失，假設(shè)債權(quán)人依然要獲得5%的真實(shí)利率收益，那么該債權(quán)人要以多的真實(shí)利率收益，那么該債權(quán)人要以多大的名義利率貸出他手中的貨幣呢

38、？大的名義利率貸出他手中的貨幣呢？ 單利計(jì)算單利計(jì)算=(1+nr)/(1+p1 1)(1+p2 2)(1+pn n)-11/n 復(fù)利計(jì)算復(fù)利計(jì)算=(1+r)/(1+p1 1)(1+p2 2)(1+pn n)1/n-1假如一筆貸款的期限為假如一筆貸款的期限為3年，名義利率為年年，名義利率為年15%，三年的通脹率分別為，三年的通脹率分別為10%，11%，12%，計(jì)算兩種不同標(biāo)準(zhǔn)的真實(shí)利率。，計(jì)算兩種不同標(biāo)準(zhǔn)的真實(shí)利率。Calculation of Interest Single InterestNo matter how long the loan term is, interest only w

39、ill be calculated based on the principal, not including the interest occurred at the end of each term period.For example, principal is $1000, interest rate is 10% per year, loan term is 3 year.So at the end of third year, what is the sum of principal and interest?Calculation of Interest Formulas for

40、 single interest calculation R=P * r * n (R is interest, P is principal, r is interest rate, n is the number of year) F=P(1+rn)Calculation of Interest Compound InterestInterest which is calculated not only on the initial principal but also the accumulated interest of prior periodsFor example, princi

41、pal is $1000, interest rate is 10% per year, loan term is 3 year So at the end of third year, what is the sum of principal and interest?Calculation of Interest Formulas for compound interest calculation R=P(1+r)n-1 (R is interest, P is principal, r is interest rate, n is the number of year) F=P(1+r)

42、nClass Exercise Suppose you put your salaries at the end of each month with $100 into bank, and you planned to keep saving for 10 years with an annual interest rate of 12%.So if you will get retire at the end of 10th year, how much money could you get back from bank?R=P*r*n(n+1)/2 Single interest 19

43、260Class Exercise Suppose you put $1000 at the beginning of every year into bank for 10 years long. The annual compound interest rate is 12%.So how much could you get back from bank at the end of 10th year?F=P(1+r)n+1-1-r/r Compound interest rate19658Class Exercise Suppose you put $10000 into bank a

44、t the beginning of first year. With an annual compound interest rate 15%, what is maximum amount of money that you can take out from bank within 3 years? A=Pr(1+r)n/(1+r)n-1 Compound interest rate 4379.8Class Exercise If you want to ensure that you can have at least $60000 each year after retirement

45、 between 60 to 80 years old with an annual compound interest rate 10%. Also we suppose you attend to work from 20 years old, what is minimum salary level of each year with an annual compound interest rate 15%?Present Value and Future Value The concept of present value is based on the common sense no

46、tion that a dollar of cash flow paid to you one year from now is less valuable to you than a dollar paid to you today. Simple loanPresent Value and Future Value The sum of principal and interest which uses compound interest to compute is called future value. By its converse calculation, the principa

47、l, namely present value, also could be figured out with the future value and interest rate. Both those two concepts have very extensive usage in the real life, such as amortization and retirement pension.Class Exercise Now you have two choices by investing on a project. Plan A is to spend 500 millio

48、n dollars in year 1, 200 million dollars both in year 2 and 3. Plan B is to invest 100 million dollars in year 1, 300 in year 2, 600 in year 3. With an annual interst rate of 15%, which plan could help lower the cost? A=500+(200/1+15%)+(200/1.15*1.15)=825 B=100+(300/1+15%)+(600/1.15*1.15)=815Determi

49、nants of Interest Rates Classic Interest Rate Theory Liquidity Preference The Theory of Loadable Funds Other factors including economy cycle, fiscal policies, government power 古典學(xué)派的真實(shí)利率理論認(rèn)為，古典學(xué)派的真實(shí)利率理論認(rèn)為，工資和物價(jià)的變化可以自動(dòng)促工資和物價(jià)的變化可以自動(dòng)促進(jìn)充分就業(yè)，其他因素如貨幣進(jìn)充分就業(yè)，其他因素如貨幣對(duì)實(shí)務(wù)經(jīng)濟(jì)的影響不存在，經(jīng)對(duì)實(shí)務(wù)經(jīng)濟(jì)的影響不存在，經(jīng)濟(jì)完全可以完成自動(dòng)均衡，在濟(jì)完全可以

50、完成自動(dòng)均衡，在此條件下，利率只有投資和儲(chǔ)此條件下，利率只有投資和儲(chǔ)蓄決定。蓄決定。Classic Interest Rate Theory It believes that interest rates are determined by interaction of savings and investment. Investment is negative related to interest rates. Savings is positive related to interest rates.Liquidity Preference Liquidity preference in

51、 macroeconomic theory refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money. 凱恩斯認(rèn)為，人們對(duì)收入有

52、兩凱恩斯認(rèn)為，人們對(duì)收入有兩個(gè)抉擇，一是在總收入中確定個(gè)抉擇，一是在總收入中確定消費(fèi)與儲(chǔ)蓄的比例，即現(xiàn)在消消費(fèi)與儲(chǔ)蓄的比例，即現(xiàn)在消費(fèi)還是未來(lái)消費(fèi)；二是在儲(chǔ)蓄費(fèi)還是未來(lái)消費(fèi)；二是在儲(chǔ)蓄總量確定后，具體儲(chǔ)蓄形成的總量確定后，具體儲(chǔ)蓄形成的選擇，即流動(dòng)性偏好選擇。選擇，即流動(dòng)性偏好選擇。Liquidity Preference According to Keynes, demand for liquidity is determined by three motives: The transactions motive: people prefer to have liquidity to ass

53、ure basical transactions, for their income is not constantly available. The amount of liquidity demanded is determined by the level of income: the higher income, the more money demanded for carrying out increased spending. Liquidity Preference The precautionary motive: people prefer to have liquidit

54、y in the case of social unexpected problems that need unusual costs. The amount of money demanded also grows with the income. Liquidity Preference Speculative motive: people retain liquidity to speculate that bond prices will fall. When the interest rate decreases, people demand more money, to hold

55、until the interest rate increases, which would drive down the price of an existing bond to keep its yield in line with the interest rate. Thus, the lower the interest rate, the more amount of money demanded (and vice versa).Liquidity Preference 利率取決于貨幣供求數(shù)量，而貨幣需求又利率取決于貨幣供求數(shù)量，而貨幣需求又取決于人們的流動(dòng)性偏好。人們對(duì)貨幣的取

56、決于人們的流動(dòng)性偏好。人們對(duì)貨幣的流動(dòng)性偏好大，則愿意持有的貨幣就多，流動(dòng)性偏好大，則愿意持有的貨幣就多，貨幣的需求大于貨幣的供給，利率就上升，貨幣的需求大于貨幣的供給，利率就上升，否則就下降。因此，利率是由流動(dòng)性偏好否則就下降。因此，利率是由流動(dòng)性偏好和貨幣供給共同決定的。和貨幣供給共同決定的。Liquidity Preference 當(dāng)一定時(shí)期的利率水平降低到一定低點(diǎn)時(shí)，當(dāng)一定時(shí)期的利率水平降低到一定低點(diǎn)時(shí)，人們就會(huì)產(chǎn)生強(qiáng)烈的利率會(huì)上升而有價(jià)證人們就會(huì)產(chǎn)生強(qiáng)烈的利率會(huì)上升而有價(jià)證券價(jià)格會(huì)下跌的預(yù)期，從而使得貨幣需求券價(jià)格會(huì)下跌的預(yù)期，從而使得貨幣需求尤其是投機(jī)動(dòng)機(jī)所形成的貨幣需求彈性無(wú)尤其

57、是投機(jī)動(dòng)機(jī)所形成的貨幣需求彈性無(wú)窮大，增加的貨幣都會(huì)被人們儲(chǔ)存起來(lái)，窮大，增加的貨幣都會(huì)被人們儲(chǔ)存起來(lái)，而陷入而陷入“流動(dòng)性陷阱流動(dòng)性陷阱”。The Theory of Loadable Funds It states that interest rates are decided by demand and supply of loadable funds, instead of savings and investment. The interest rates are paramount important in this process for the following reason

58、s: 1. because it is the reward for lending and the cost of borrowing, then influences the behavior of net borrowers and lenders; 2.this behavior also counteracts the interest rate.The Theory of Loadable Funds The demand for loadable funds originates from the household, business, government, and fore

59、ign net borrowers who borrow because they are spending more than their current income. The downward-sloping demand curve indicates that net borrowers are willing to borrow more at lower interest rate.The Theory of Loadable Funds The total supply of loadable funds originates from two basic sources: 1

60、.the household, business, government, and foreign net lenders who are prepared to lend because they are spending less than their current income; 2.the central bank, which, in its ongoing attempts to manage the economys performance, supplies reserves to the financial system that lead to increases in