ods in the current period. The CPI, thus, is a nominal measure.
Federal Reserve Discount Rate. The Federal Reserve Discount Rate is the interest rate that the Federal Reserve System charges on a loan it makes to a member bank. Such loans, when allowed, enable a bank to meet its reserve requirements without reducing its loans (Federal Reserve Bank of San Francisco, 2004).
Standard & Poor's (S&P) 500 Index. The S&P 500 Index is an established, well-accepted index of equity stocks of the 500 largest public companies traded in stock exchanges in the United States. The S&P 500 Index is calculated using a base-weighted aggregate methodology. In this approach, the level of the S&P 500 Index reflects the total market value of all 500 component stocks relative to a particular base period. The total market value of a company is determined by multiplying the price of its stock by the number of shares outstanding. The S&P 500, therefore, is a composite index, wherein an indexed number is used to represent the total market value at a specific time in relation to the base period value of the index.
Currency Exchange Rate. The term "exchange rate" refers to the rate required to exchange one currency for another in the international currency markets. The basic approach to defining the exchange rate between two currencies is a "spot rate", i.e., the rate at which two currencies could be exchanged at a specific time. A long-term (or real) exchange rate reflects a weighted- average exchange rate over a specified period, such as a year. The currency exchange rate considered in this analysis is the US$:Ç exchange rate.
The 18-month forecast period is 2nd Calendar Quarter 2005 (April-May-June 2005) through 3rd Calendar Quarter 2006 (July-August-September 2006). The forecasts were issued by the Mortgage
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