AP Macroeconomics / Unit 4: Financial Sector
4.1 Financial Assets
Notes
- Money is the most liquid asset.
- Bonds: loans to a borrower that pay interest. Bond prices and interest rates move in opposite directions.
- Stocks: ownership shares in a company.
Practice
When interest rates rise, the price of existing bonds:
New bonds pay more, so old ones are worth less.
The most liquid asset:
Easiest to spend.
Buying a share of stock makes you:
Equity.
Ready for more? Take the Unit 4 test.