EC140 Chapter Notes - Chapter 28: Excess Supply, Shortage, Money Supply

• School: WLU
• Department: Economics
• Course: EC140
• Professor: Ken Jackson

Document Summary

Money: all assets the server as medium of exchange. Bond= intrest earning and claims on real cap. Present value: value now of the future payment that the assets offer. R1= amount got after a year i = intrest rate , n = period. Higher the market interest= lower prevent value. Bond= coupon payment= every year & return face value of the bond at the end of the term. Pv of bond: fv/(1+r)^n ( for the face value ) +( pmt((1-(1+r)^-n)/r))) ( year payment) Rt= facevale+ the coupon payment = present value. Interest rate , bond prices , and bond yield. Present value of any given bond = negatively related to interest rate. Bo(cid:374)d"s e(cid:395)uili(cid:271)(cid:396)iu(cid:373) (cid:373)a(cid:396)ket p(cid:396)i(cid:272)e = p(cid:396)ese(cid:374)t value. Given future payment= lower bond price = higer rate of return on the bond or bond yield. Fv= pricex(1+r)^n. rise in interest rate= decline in pv = yield rises ( interest rate and yield rate same way.