1. Economics 434 Financial Markets Professor Burton University of Virginia Fall 2015 November 24, 2015

2. Finishing Cash Flow Discussion EBIT – unlevered net income EBITDA – cash flow Free Cash Flow – EBITDA corrected for necessary capital expenditures to maintain fixed assets (these expenditures are subtracted from EBITDA to obtain “free cash flow” November 24, 2015

3. Now, To Change the Subject Fed suggesting rate increase Question: How do they do this? – Can they raise rates? – If so, how? November 24, 2015

5. So, How Does The Fed Raise Rates Sell bonds to reduce reserves – Problem: reserves too high Pay interest on deposits at the Fed? Do “reverse repos”? ????? November 24, 2015