RSM230H1 Chapter Notes - Chapter 1: Foreign Exchange Market, The Foreign Exchange, Financial Instrument

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Financial markets, markets in which funds are transferred from people who have an excess of available funds to people who have a shortage. A security (also called a financial instrument) is a claim on the issuer"s future income or assets (any financial claim or piece of property that is subject to ownership). A bond is a debt security that promises to make payments periodically for a specified period of time. Debt markets, also often referred to generically as the bond market, are especially important to economic activity because they enable corporations and governments to borrow to finance their activities and because they are where interest rates are determined. An interest rate is the cost of borrowing or the price paid for the rental of funds. Because different interest rates have a tendency to move in unison, economists frequently lump interest rates together and refer to the interest rate.

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