ECO 1102 Lecture Notes - Lecture 8: Dow Jones Industrial Average, Financial System, Credit Risk

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30 Mar 2016
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ECO 1102 Full Course Notes
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Financial system: the group of insituions in the economy that help to match one person"s savings with another person"s investment. Financial markets: inancial insituions through which savers can directly provide funds to borrowers. Bond: a ceriicate of indebtedness that specidies the obligaion of the borrower to the holder of the bond. >debt inance: the sale of a bond to raise money. Stock: represents ownership in a irm and is, therefore, a claim to its proits. The prices at which shares trade on stock exchanges are determined by the supply and demand for the stock. Equity inance: the sale of a stock to raise money. 1st pay back the bond holders then the stock holders. Stock index: an average of a group of stock prices (ex. Because stock prices relect expected proitability, stock indexes are watched closely as possible indicators of future economic condiions. Financial intermediaries: inancial insituions through which savers can indirectly provide funds to borrowers.

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