MGEC71H3 Chapter Notes - Chapter 1: The Market Common, Business Cycle, Financial Instrument

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Chapter 1 why study money, banking, and finance markets. 2007 crisis, aftermath demonstrated importance of financial system in regards to economic well-being. A security (aka financial instrument): a claim on the issuer"s future income or assets. Bond: a debt security promises to make payments for a specific period of time. Important to econ. activity b. cus it enables corporations and gov. to borrow and determine interest rates. Important: to explain fluctuations in i. rates substantial over the last 20 years: different i. rate tend to move in unison, thus lump-interest rates occur aka (cid:862)the(cid:863) interest rate. Common stock (just aka stock): rep a share of ownership in a corporation: claim on the earnings/assets of the corporation. Important factor in business decisions due to the prices of shares affect the amount of funds raise- able for financial spending. Without them, financial market would not be able to move funds for circulation and economic activity.

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