COMMERCE 2FA3- Midterm Exam Guide - Comprehensive Notes for the exam ( 22 pages long!)
5 Oct 2017
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Document Summary
When financial markets are in crisis, the real economy is in crisis. This became painfully obvious in the fall of 2008 when financial markets around the world were on the verge of melting down. Efficient transfer of funds from those with excess to those with insufficient. Players are businesses, financial institutions, households, and various levels of governments. Businesses have investment opportunities but a shortage of capital. Say there is a negative flow today and a positive flow next year. If there is no risk, it depends on: If there is risk, it depends on cost of capital. You will have 000 at the end of they year. Return - 11 000/10 000 - 1 =10% Therefore this is a good investment because you can do better investing rather than keeping money in bank than keeping money in bank. Financial assets represent claims to cash flows arising from production. If readily traded (stocks and bonds) - these are called securities.
