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The Stock Market and the Economy
age?
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Bonds
Bonds have several properties:
Face value, or the amount the buyer
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Bonds
Bonds have several properties:
Maturity date, or the date when the
funds are paid back to the lender (although the lender may sell the bond before maturity).
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Bonds
Bonds have several properties:
A fixed payment, known as a coupon,
known in advance, no matter what happens to interest rates, stock prices, and so on.
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Bonds
Bonds have several properties:
Instead of the coupon responding to a
change in the interest rate, it is the price of the bond that changes.
The bond is worth less when interest
rates rise.
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Bonds
15-yr. Bond Face Value: $10,000 Coupon rate: 10% Bank Account requires only: $5,000 with interest rate of 20%
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Stocks
A stock is a certificate that certifies ownership of a certain portion of a firm. When a firm issues new shares of stock, it does not add to its debt. Instead, it brings in additional owners who supply it with funds.
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Stocks
Stockholders have a right to select the management of the firm and to share in its profits. Unlike bonds or direct borrowing, stocks do not promise a fixed annual payment. Returns depend on company performance. If profits are high, the firm may pay dividends.
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Stocks
A capital gain is an increase in the value of an asset.
A realized capital gain occurs when the owner of an asset actually sells it for more than he paid for it.
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Stocks
Most stocks bought and sold on the stock market daily are not newly issued but issued long ago, when the firm goes public.
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will be
When the dividends are expected to be
paid
The amount of risk involved
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$110
$110
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30 actively traded large companies. The oldest and most widely followed index of stock market performance.
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over 5,000 companies traded on the NASDAQ stock market. The NASDAQ market takes is name from the National Association of Securities Dealers Automated Quotation System.
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the largest 500 firms traded on the New York Stock Exchange, the NASDAQ stock market, and the American Stock Exchange.
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prices leads to a $0.04 increase in consumption and investment, and a multiplier of 1.4, then: 0.04 x $2.5 trillion x 1.4 = $140 billion increase in GDP, or 1.5% of GDP.
The growth rate of GDP would have been around 2.8% instead of 4.5%
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government surplus would not have been as high, since taxable income and profits would have been less.
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been no stock market correction in 2001 and 2002, and the growth rate of real GDP would have been higher.
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rate would have remained at about 5.5 percent. It was 4% during the boom.
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bill rate and interest rates as a whole would have been lower.
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the stock market to the extent that the market affects the things that it ultimately cares about, namely output, unemployment, and inflation.
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