ECON 1P92 Study Guide - Final Guide: Exchange Rate, Ceteris Paribus, Bell System

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16 Sep 2018
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ECON 1P92 Full Course Notes
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ECON 1P92 Full Course Notes
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Chapter 27: money, rates, & economic activity. Bought and sold in bond market and continual basis. Are loans and you are the money lender to the banks. Similar to iou issued by government or corporations. Earns interest for loaning money to a business or the government. Makes regular coupon interest payments and also final bond"s face value payment. Because bonds make payments in the future, their present value is negatively related to the market interest rate. Short-term government bonds(as short as 3 month) Increase in increase in the market interest rate leads to a fall in the price of any given bond. Decrease in the market interest rate leads to an increase in the price of any given bond. Present value of any given bond is negativ to market interest rate. A bond"s equilibrium market price = present value. There are various types of bonds, they are all differ in issuer, price, yield, riskiness, and term of maturity.

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