ECON 2035 : ECON 2035 Exam 1

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15 Mar 2019
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Three major components of the financial system: 1. Dividend is a payment that a corporation makes to its shareholders: bonds (a financial security issued by a corporation or a government that represents a promise to repay a fixed amount of money) Interest rate: the cost of borrowing funds (or the payment for lending funds), usually expressed as a percentage of the amount borrowed: foreign exchange (units of foreign currency) To buy foreign goods and services or foreign assets, a domestic business or a domestic investor must first exchange domestic currency for foreign currency. Banks engage in foreign currency transactions on behalf of investors and business firms: securitized loans. Before markets for loans were created, it wasn"t possible to sell loans. Securitization: the process of converting loans and other financial assets that are not tradable into securities. Note that what a saver views as a financial asset a borrower views as a financial liability.

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