EC140 Chapter Notes - Chapter 28: Demand Curve, Human Capital, Potential Output
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EC140 Full Course Notes
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Money ~ all assets that serve as a medium of exchange; paper money, coins, bank deposits that can be transferred on demand. Bonds ~ all other forms of inancial wealth; interest-earning inancial assets and claims on real capital (equity) Present value (pv): the value now of the future payments that an asset ofers. Interest rate is used to discount the value of the future payments and come to the present value of the asset. R1 is the future value (the amount we receive one year from now) 1 + i i is the interest rate! A bond promises to pay its face value of at the end of 3 years, and also a coupon payment at the end of each of the 3 years! The higher the interest rate, the lower the present value. Treasury bills only pay a single payment in the future, no coupon payments.