ECON308 Study Guide - Final Guide: Real Interest Rate, Nominal Interest Rate, Yield Curve
6 Jan 2018
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Chapter 1-3: financial markets: markets in which funds are transferred from those who have an excess to those who need. Direct finance: borrowers get funds directly from lenders; avoids cost of nancial intermediaries; securities are assets for the person who buys them and liabilities for the individual (assets for saver lender, liabilities for spender borrower) Medium of exchange: avoids double coincidence of needs, reduces transaction costs, promotes specialization. Must: be easily standardized, widely accepted, divisible, easy to carry, not deteriorate quickly. Unit of account: used to measure value in the economy, reduces transaction costs. Most liquid form of money: m2 = m1 + small denomination time deposits + savings deposits and money market deposit accounts + money market mutual fund shares. The longer the time until maturity the greater the magnitude of the price. R = initial ytm if the time to maturity equals holding period.
