ECMC48 Chapter 1

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University of Toronto Scarborough
Economics for Management Studies
Jack Parkinson

Chapter 1 Why study financial marketFinancial market markets in which funds are transferred from people who have excess of available funds to people who have a shortageFinancial Market channel funds from savers to investorspromote economic efficiencyIt affects personal wealth and behaviour of businessWellfunctioning financial markets are a key factor in producing high economic growth The bond market and interest ratesSecurityFinancial Instrument a claim on the issuers future income or assetsAssets any financial claim or piece of property that is subject to ownershipBond a debt security that promises to make payments periodically for a specified period of timeThe bond market is where interest rates are determinedInterest Rate the cost of borrowing or the price paid for the rental of funds Mortgage car loan interests the price over time of borrowing moneyHigher Interest Ratedeter purchases or investment and encourage savings deter prevent you from buying a car or houseencourage you to saveInterest rates have an impact on the overall economy because they affect not only consumers willingness to spend or save but also busines
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