ECO 1102 Lecture Notes - Lecture 9: Dow Jones Industrial Average, Loanable Funds, Financial System

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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Document Summary

Financial system: the group of institutions in the economy that help to match one person"s savings with another person"s investment. This chapter examines how the financial system works. Financial institutions can be grouped into two categories: financial markets, financial intermediaries. Financial markets: financial institutions through which savers can directly provide funds to borrowers. Bond: a certificate of indebtedness that specifies the obligation of the borrower to the: debt finance: the sale of a bond to raise money holder of the bond. Characteristics: the bond"s term, the bond"s credit risk. Stock: represents ownership in a firm and is, therefore, a claim to its profits. Equity finance: the sale of a stock to raise money. The prices at which shares trade on stock exchanges are determined by the supply and demand for the stock. Stock index: is an average of a group of stock prices: dow jones industrial average, s&p/tsx composite index.

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