What is a financial crisis?
The key function of the financial system is to facilitate flow of funds from
lenders to borrowers.
Much economic activity depends on firms being able to borrow.
Firms borrow to invest in physical capit
Stocks and the Stock Market
Stock: a claim to partial ownership in a firm, giving the
stockholder a legal claim on firms profits and equity
Equity: the value of a firms assets and the value of its liabilities
Stocks are often cal
The Behavior of Interest Rates
The Determinants of Portfolio Choice
(determinants of asset demand)
Savers level of wealth
Expected rate of return
Wealth = total value assets total value liabilities
What we did last time . . .
Function and structure of the financial system
Financial Markets: 3 ways to classify
Bond and Stock Markets
Primary and Secondary Markets
Money and Capital Markets
Financial Intermediaries: 3 types