CHAPTER 4

Understanding Interest Rate

(Muhammad Inung K. F1119049)

The concept of present value is based on the reality that the money we pay / receive a day
this is more valuable than the same amount of money that we pay / receive in the future.  To
calculate the present value, you can use a formula following:

4 Types of Credit Market Instruments

1. Simple loan
An ordinary loan that must be returned within a certain time period with extra interest
2. Fixed-payment loan
Loans for repayment through payment of the same amount in each period
3. Coupon bonds
Paying bond holders with fixed interest payments every year until due date
4. Discount bond
Bond purchase under face value (there is a discount) and face value will be paid on
the due date but there is no interest for payment.
Simple loan and discount bond payments only when the due date, but fixed- payment
loans and coupon bonds payments are periodic until maturity.

Questions and Problems

(Muhammad Inung K. F1119049)

1. Less. It would be worth 1/(1 = 0.20) = €0.83 when the interest rate is 20%, rather than
 1/(1 = 0.10) = €0.91 when the interest rate is 10%.
2. No, because the present discounted value of these payments is necessarily less than €10
million as long as the interest rate is greater than zero.
2 3
3. €1,000/(1 = 0.10) = €1,210/(1 = 0.10) = €1,331/(1 = 0.10) = €3,000
4. The yield to maturity is less than 10 percent. Only if the interest rate was less than 10
percent would the present value of the payments add up to €4,000, which is more than
the €3,000 present value in the previous problem.
2 20 20
5. €2,000 = €100/(1 = i) = €100/(1 = i) = . . . = €100/(1 = i) = €1,000/(1 = i) .

Web Exercise
(Muhammad Inung F1119049)

4. a. MARKET AND ECONOMIC STATISTICS as of Market Close March 31, 2005,

with 3-month and 12-month changes:

Long term real rate is greater than three month real rate

b. Chart B shows the evolution of two different measures of long-term real interest
rates since January 1999. Ideally, the nominal yield on ten-year government bonds
should be deflated by a measure reflecting expected inflation for the euro area over
the coming ten years. However, no such measure is available on a timely basis. As a
rough approximation, the measure of expected inflation based on the Consensus
Economics inflation forecast was used to deflate euro area nominal ten-year bond
yields. In addition, the chart shows the yield on the ten-year French index-linked
bond, which, although subject to several caveats, offers a more direct measure of the
long-term real interest rate. In March 2001, the two measures stood at around 40 to 60
basis points above the levels seen at the start of Stage Three of EMU in January 1999,
but around 50 to 120 basis points below their peak levels reached in January 2000.

The table below compares the levels of real interest rates in March 2001 with the
average levels over the past two decades. All averages are deflated by annual headline
consumer price inflation. In addition to the euro area, averages for Germany are
included. This is justified by the fact that interest rates in many countries which are
now part of the euro area incorporated premia reflecting exchange rate risk during the
period prior to Monetary Union. By contrast, German interest rates were less affected
by this and may therefore be more comparable with present levels of euro area rates.

The table shows that, in March 2001, the entire range of the three measures of the
short-term real interest rate was below the averages for the 1980s and the 1990s.
5. Obligasi diskon dijual dengan harga rendah dan seluruh pengembaliannya datang dalam
bentuk apresiasi harga. Anda dapat dengan mudah menghitung harga saat ini ikatan
diskon menggunakan kalkulator keuangan di
www.treasurydirect.gov/indiv/tools/tools_savingsbondcalc.htm.

Untuk menghitung nilai-nilai obligasi tabungan, baca instruksi pada halaman dan klik
Memulai’. Isi informasi (Anda tidak perlu mengisi bidang Nomor Seri Obligasi) dan klik
pada perhitungan.

Jawab :

Untuk menjawab soal ini, dengan menggunakan Treasury Direct dan memperhatikan
langkah-langkah yang tertera sehinga diperoleh untuk menghitung nilai obligasi
tabungan pada bulan Maret 2020 diperoleh data sebagai berikut: