Chapter 29
The Financial System
By Boundless
A financial intermediary is an institution that facilitates the flow of funds between individuals or other economic entities.
Savings are income after-consumption and investment is what is facilitated by saving.
The loanable funds market is a conceptual market where savers (suppliers) and borrowers (demanders) are able to establish a market clearing.
The time value of money is the principle that a certain amount of money today has a different buying power (value) than in the future.
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Risk is pervasive in the economy and is an essential component in the derivation of an asset's investment return.
The compensation adjustment for holding an asset of a given risk profile can be further enhanced through asset diversification.
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The security market line is useful to determine if an asset being considered for a portfolio offers a reasonable expected return for risk.