financial systems (L7,L8,L9) Flashcards
1
Q
ln(1+A)
A
A
2
Q
roles of financial system
A
make financial investments
provide financial capital
3
Q
financial capital
A
funds to invest in physical capital
4
Q
physical capital
A
tools, machinery, buildings for production
5
Q
income equation
A
saving+(tax-gov spending)+(imports-exports)
6
Q
how is income financed
A
private saving
gov budget surplus
borrowing from the rest of the world
7
Q
ipo
A
initial public offering on a stock exchange, the price is set by an investment bank
8
Q
financial capital equation
A
price per share x no. of shares issued
9
Q
how are share prices determined
A
stock market
investors look at pros n cons
(p+d/1+r)S -pS p=future price d=dividend r=interest rate
10
Q
stock price
A
p+d/1+r
11
Q
bonds
A
promise/i owe you
12
Q
interest rate on a bond
A
100 x coupon/issuance price
13
Q
resale price
A
principle+coupon/1+r
