Using a market segmentation argument, this paper uses the interest rate derivative's arbitrage-free methodology to value both demand deposit liabilities and credit card loan balances in markets where deposits/loan rates may be determined under imperfect competition. In this context, these financial instruments are shown to be equivalent to a particular interest rate swap, where the principal depends on the past history of market rates. Solutions are obtained which are independent of any particular model for the evolution of the term structure of interest rates.

Although poverty research has a very long history in the social sciences, serious debate on the sufficiency of economic growth to eliminate poverty was rekindled by the inception of the “War on Poverty” by the Kennedy and Johnson Administrations during the early 1960s. Forty years later, the measurement of growth’s effect on poverty remains an important input to the policy question of whether, how much, and how govern ment efforts should address poverty reduction. Early work by Henry J. Aaron (1967) found that poverty among certain groups seemed highly sensitive to economic growth, while other groups were barely affected. Subsequent researchers have realized that poverty has a spa tial as well as a demographic dimension, and more recent work has examined poverty by “race and region” using disaggregated time series. The present study further refines the examination of poverty by racial/ethnic group and region by investigating the impact of economic progress on poverty across black, Hispanic, and white populations measured over 35 years at the level of the census region. To our knowledge, this is the first research to study all three of these groups using regional data. A regional analysis is important because the North, Midwest, South, and West have had different industrial structures and different economic histories over the last three decades. As shown in Figure 1, regional poverty rates of blacks and Hispanics relative to whites are quite different. Moreover, regional differences exist in the levels and growth rates of real per capital GDP, in the secular decline in manufac turing, and in the pattern of the unemployment rate. In addition to economic events, we control Non-White Poverty and Macroeconomy: The Impact of Growth

[A general prediction from the economic theory of tax reporting is that taxpayers will report more income as the tax rate increases, but the related empirical evidence has been mixed. We conducted an experiment to examine whether taxpayers' responses to a tax-rate change depend on both economic effects and perceptions of horizontal and exchange inequity. Our findings reconcile the previously inconsistent empirical results by identifying conditions under which perceptions of inequity drive taxpayers' reporting decisions. In summary, subjects reported less (more) income as tax rates increased (decreased) when they were inequitably treated relative to others, but not when they were equitably treated relative to others.]

The purpose of this study is to investigate whether the information content of executive earnings forecasts, as measured by changes in trading activity, differed depending on (1) the forecast horizon and (2) the magnitude of the predicted earnings change. The results of the study indicate that the information content of shorter term and longer term forecasts was virtually the same. With respect to the magnitude of the predicted earnings change, the results indicate that predictions of relatively large changes in earnings (greater than 40 percent) were associated with large changes in trading activity. However, no statistically significant relation between predicted earnings change and changes in trading activity was observed.

To respond to the challenge to produce business school graduates who are intelligent users of computer power requires a significant commitment. Yet it is a challenge that must be met. At the Amos Tuck School access to time-shared computer power has given us the hardware characteristics necessary to provide computer accessibility to all our students on a demand basis. Through a formal computer course at the start of the two-year curriculum the student gains the familiarity and technical skill necessary to permit him to make intelligent use of the computer in his other courses at Tuck. As this formal instruction is reinforced in his other courses the student builds his confidence and skill in applying computer power to a wide variety of problems and situations. Many of these applications are formally structured into the curriculum; others are developed by the student simply because he saw a situation where the computer would help him perform more efficiently. Computer education of this sort produces at least two challenges to the faculty. Because readily available computational power can allow the student to learn more and understand better, the faculty is challenged to continue to look for areas within their courses where computer usage might reap these benefits. The second challenge is one of software design to make the computer more useful to the student in studying and solving business problems. The LAFFF language is the first major attempt at business-oriented software design, but certainly not the last. Responding to these challenges is beneficial to the teacher both in his teaching and research activities. More importantly, we feel it is beneficial to our students. These efforts, coupled with the impressive capabilities of time-shared computer facilities, produce an educational environment of unusual potential. Our efforts related here represent only a small start towards realization of the full potential.

Interviews with the top-level financial executives in fifty-one leading corporations have shown them to be seriously concerned with the country's tax depreciation policy. They stress that the administration of the present law by the Internal Revenue Service results in wasteful and annoying haggling over lengths of asset Jives and salvage values. In addition, these executives indicate that adherence to any depreciation method based on historical cost alone fails to adequately meet the problem raised by continuing inflation. However much accountants may desire to restrict depreciation to fixed asset historical cost, the interviews with 150 policy makers have reemphasized management's concern with the problem of replacement of assets in a period of rising prices. Those in management interviewed agreed that, unless a firm has the stability of earnings and credit position which would permit it to acquire or replace plant and equipment by borrowing in perpetuity, funds for replacement and/or betterments can come from only three sources: (1) equity sales; (2) retained earnings (or borrowings, that ultimately must be paid out of retained earnings); and, (3) depreciation accruals. Any long-run augmentation of any one or more of these three sources represents recognized aid in management's solution to the problem of replacement. Concessions in the areas of capital gains and small business benefits were made, at the same time, by these leaders in big business as part of their long-range corporate tax "package." The interviewed executives were in general agreement that favorable depreciation reform is needed for long run modernization and growth of the country's productive machine. An examination of their capital-expenditure decision-making processes has revealed, however, that stimulation is not immediate enough to enable depreciation reform to be used as a tool to fight business cycle recessions. Emphasis was placed on the fact that the results of adequate reform will make themselves felt in the decades which stretch into the future, not in the months immediately following the recognition of a business down-turn. The tax depreciation muddle can only be muddied further by any attempt to use tax depreciation allowances as a means for short-run economic juggling.

We analyze the relation between comprehensive measures of board quality and the cost as well as the non-price terms of bank loans. We show that firms that have higher quality boards with a greater advisory presence borrow at lower interest rates. This relation exists even after controlling for ownership structure, CEO compensation policy, and shareholder protection, as well as the size and financial characteristics of the borrower and of the loan. We also show evidence that board quality and other governance characteristics influence the likelihood that loans have covenant requirements, but the relations differ by covenant type. When we combine the direct and indirect costs of bank loans we find that firms with large, independent, experienced, and diverse boards and lower institutional ownership borrow more cheaply. Overall, the evidence indicates that board quality impacts the cost of bank debt.