ECO 1102 Lecture Notes - Lecture 4: Loanable Funds, Dow Jones Industrial Average, Financial System

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ECO 1102 Full Course Notes
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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 insituions can be grouped into two categories: financial markets, financial intermediaries. Financial insituions through which savers can directly provide funds to borrowers. Bond: a ceriicate of indebtedness that speciies the obligaion of the borrower to the holder of the bond. Debt inance: the sale of a bond to raise money. Characterisics: the bond"s term the bond"s credit risk. Stock: represents ownership in a irm and is therefore, a claim to its proits. : 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. Because stock prices relect expected proitability, stock indexes are watched closely as possible indicators of future economic condiions.

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