The hand holder has NO OWNERSHIP of the company
Nom interest rate decrease Value Bond increase
Nom interest rate increase Value Bond decrease
Stock owners can ear a profit in two ways
1. Dividends which are portions of a corporations profit, are paid out to stock holders
2. A capital gain is earned when a stock holder sell stock for more than that she paid for it
A stock holder sell stock at a lower price the purchase price suffered a capital loss
Federal Reserve Bank
Two names nick, the fed, control bank
Money Market
Demand for money has inverse relationship between nominal interest rates and the quantity of money demanded
1) What happens quantity demanded of money when IR increase?
Quantity demanded decrease because individuals would prefer to have interest earning assets instead of borrowed liabilities
2) When QD when IR decrease?
QD increase There is no incentive to convert cash into interest earning assets.
Downward sloping
monet shifters
change in price level
change in income
change in taxation that affects investment
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