ECN 204 Lecture Notes - Longrun, Demand Curve, Virtuous Circle And Vicious Circle
30 Apr 2012
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Document Summary
The financial system: the group of institutions that helps match the saving of one person with the investment of another. Financial markets: institutions through which savers can directly provide funds to borrowers: the bond market: a bond is a certificate of indebtedness. It identifies the time at which the loan will be repaid, called the date of maturity, and the rate of interest that will be paid periodically until the loan matures. The buyer of a bond gives his or her money to intel in exchange for this promise of interest and eventual repayment of the amount borrowed (called the principal). The buyer can hold the bond until maturity or can sell the bond at an earlier date to someone else. The first characteristic is a bond"s term the length of time until the bond matures. Long-term bonds are riskier than short-term bonds because holders of long-term bonds have to wait longer for repayment of principal.
