Week%206%20Lecture%20-%20HO

Week%206%20Lecture%20-%20HO - Introduction to Financial...

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Introduction to Financial Markets Instruments Traded: Financial Intermediaries Loanable Funds Market: Bonds - DEBT Stocks - EQUITY Commercial Banks Mutual Funds MACROECONOMIC determinants of interest rates in the LONG RUN
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Discount Bonds I.O.U $100 1 Year from today.                 -Bob H. Suppose I offer to sell you the following promise, a promise to pay you $100 one year from today………. . Q: Would you pay me $100 today for this promise?
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Coupon Bonds I.O.U $100 4 Years from today  AND  3.2 percent of PAR on each of the dates below.                 -Bob H. 1 year from  today 2 years from  today 3 years from  today 4 years from  today COUPON BOND: This Coupon Bond offers PAR or FACE VALUE of _________ on its MATURITY DATE of ____________________. The TERM TO MATURITY is ___________. This bond also offers annual coupon payments to the its bearer or owner over its lifetime. It offers a STREAM of future payments:
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Bond Interest Returns or Yields Bonds are DEBT instruments. Bond sellers are borrowers. Bond buyers are lenders. Sellers are indebted to buyers. A bond offers a STREAM OF PROMISED FUTURE PAYMENTS. It is sold in bond markets where forces of supply and demand determine the BOND PRICE, PBond. To determine the bond’s interest return or yield, we have to consider BOTH
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Week%206%20Lecture%20-%20HO - Introduction to Financial...

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