ECO 1102 Lecture Notes - Lecture 7: Financial System, Autarky, Credit Risk

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Eco1102 - lecture 7 - saving, investment & the financial system. The group of institutions in the economy that help to match one person"s saving with another person"s investment. It can be grouped into two categories. Financial markets are the institutions through which savers can directly provide funds to borrowers. Bond is a certificate of indebtedness, so the buyer lenders money in return for interest payment over some period of time and future repayment of the money borrowed. If the interest rate is higher, the higher is the credit risk. A stock is a claim to partial ownership of a firm and its profits. Compared to bonds, stocks offer higher risk and higher return in the form of dividends and capital gains. Stock prices are determined by the supply and demand for the stock. Stock index is an average of a group of stock prices.

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