ECON 201 Lecture Notes - Lecture 14: Economic Equilibrium, Mutual Fund, Life Insurance
Document Summary
Econ 201 lecture 14 financial markets. A household"s wealth is the value of its accumulated savings. A financial asset is a paper claim that entitles the buyer to future income from the seller: stock, bond. A physical asset is a claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes: rental property. A liability is a requirement to pay income in the future: for example, if i borrow money, that"s a liability to me, but it"s an asset to the lender. An asset is liquid if it can be quickly converted into cash: us government debt, short-term time deposits. An asset is illiquid if it cannot be quickly converted into cash: a house. There are four main types of financial assets: loans, bonds, stocks, bank deposits. In addition, financial innovation has allowed the creation of a wide range of loan- backed securities.
