Banking and Monetary Policy_Butkiewicz_Date_020910

Banking and Monetary Policy_Butkiewicz_Date_020910 - The...

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These Notes go along with the power point for Chapter 1 SLIDE# 3: Bonds- any set of financial assets that involve a fixed set of payments Stocks- amount you receive depends on companies finances, not always a fixed amount, claim on money firm earns after debts 4: Example of face value- start w/ $1000, matures 10 years, interest rate 5%, twice a year end up with 500 a year for 10 years to get back to initial $1000 Maturity- when loan is re-paid 5: Commercial paper and treasury bills are both examples of short term debts; treasury bills are issued every week, we now roll it over/borrow more money to “pay” it back due to recession 10: spread the risk, “don’t put all your eggs in one basket” 11: 401K- you put money aside and make decisions on what assets to buy, if you make a good choice you retire with a lot of money but if you choose poorly you will not have the money you had hoped for.
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Unformatted text preview: The fact that employees lost everything stresses the importance of diversification 12: example of moral hazard- a professional athlete signs a contract; team puts in stipulations; if inured due to breaking these team does not have to pay the athlete anymore 15: important to understand the relationship between asymmetric information, moral hazard and adverse selection 17: investment banking is where the big money is, they are not really a bank 19: know the difference between direct and indirect finance 20: banks (indirect) finance more costly 21: the more likely the borrower had to lose the more likely the bank is to loan them money. 24: loans were made to people who couldnt repay them 26: August 17 2007- when crisis started 27: recession was mild from August 07 until September 08. Most severe rescession since the great depression; called the great recession...
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This note was uploaded on 08/29/2010 for the course ECON 302 taught by Professor Abrams during the Spring '08 term at University of Delaware.

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