[EC223] - Final Exam Guide - Everything you need to know! (33 pages long)

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29 Nov 2016
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Chapter 1: financial markets: channel funds from those who do not have a productive use for them to those that do. Directly affects our lives, businesses, and economy. A security (or a financial instrument) is a claim on the issuer"s future income or assets. Have a claim over the issuant future income/ assets. A bond is a debt security that promises to make payments periodically for a specified period of time. Short term interest rate is lower than the long term interest rate. Due to the depositor sacrificing their liquidity for a longer time, therefore requiring a liquidity premium to be paid to provide incentive for these lenders to sacrifice their liquidity. An interest rate is the cost of borrowing or the price paid for the rental of funds. 4% interest on means you must repay when due. Upper bound is called the bank rate: the stock market. A stock is a share of ownership in a corporation.

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