ECON 102 Chapter Notes - Chapter 28: Economic Equilibrium, Liquidity Preference, Money Supply

• School: UBC
• Department: Economics
• Course: ECON 102
• Professor: Robert Gateman

Document Summary

Bond: financial asses that promises to make one or more specified payments at specified future dates. A single payment one year hence: the higher the interest rate, the lower the present value of the bond. Coupon payments: promised payments each year of a bond, on top of the face value of the bond. Higher interest rates imply that any future payments are discounted at a higher rate and thus have a lower present value. Treasury bills: short-term government bond (does not make coupon payments: also longer-term government bond, corporate bonds that make regular coupon payments. A bond"s present value is negatively related to the market interest rate. At present value, the bond is at the equilibrium market price. The present value of a bond is negatively related to the market interest rate. A bond"s equilibrium market price will be equal to its present value.