01:220:103 Chapter Notes - Chapter 14: Stock Market, Corporate Bond, Total Return
27 Nov 2018
School
Department
Course
Professor
Document Summary
When stock or housing prices rise, household wealth rises, and households consume more. Stock and housing prices are unpredictable (asset prices) Gov can only react once a large change has been made, cannot put policies into place before (largely reactionary) If a firm wants to make a large purchase, often cannot pay for it without help. Borrow from a bank and pay back with interest over time. If you buy a bond, you are making a loan to the firm. Bond - a promise to pay a fixed coupon periodically during the term of the bond and then to repay the full amount of the bond at the end of its term. Corporate bonds - bonds issued by firms, part of a firm"s debt. Stock - a certificate that certifies ownership of a certain portion of the firm. Does not add to debt, bring in additional owners to the firm who agree to supply it with funds.
