Things that hold value, like cash, stocks, and bonds.

How easily an asset can be converted into cash.

The net gain or loss on an investment over time.

The chance that an investment's actual outcome differs from the expected one.

A security representing ownership in a company.

Companies sell stocks to raise capital, avoiding debt but sharing ownership.

An interest-bearing asset issued by businesses or governments.

Companies issue bonds to borrow money, promising to repay the principal plus interest.

Borrowing money and repaying it with interest.

Money in your checking account that you can access anytime.

Stocks generally have higher risk than bonds.

Stocks generally offer higher potential returns than bonds.

Stocks represent ownership in a company, while bonds represent a loan to a company or government.

Equity financing involves selling stocks, while debt financing involves issuing bonds.

Demand deposits are more liquid than bonds, as they can be accessed immediately, while bonds need to be sold.

Stocks may provide income through dividends, while bonds provide income through interest payments.

High liquidity assets (e.g., cash) can be quickly converted to cash, while low liquidity assets (e.g., real estate) take longer.

Bond prices are inversely related to interest rates, while stock prices are influenced by a wider range of factors including company performance and economic conditions.

Bondholders have a higher claim on a company's assets in bankruptcy than stockholders.

Stocks are generally more suitable for investors with a higher risk tolerance and longer time horizon, while bonds are more suitable for investors seeking stability and income.

Increases the money supply by encouraging banks to borrow more from the central bank.

Leads to a decrease in interest rates due to the increased availability of loanable funds.

Causes an increase in demand for bonds, leading to higher bond prices.

Leads to an increase in aggregate demand because lower interest rates encourage more investment and consumption.

Quantitative easing, which involves a central bank buying government bonds, typically lowers bond yields (interest rates) by increasing demand and driving up bond prices.

Government fiscal stimulus, such as increased spending or tax cuts, can increase the supply of government bonds, potentially leading to higher interest rates (bond yields) as the government borrows more money.

Inflation targeting by central banks can help stabilize bond markets by providing clear expectations about future monetary policy, reducing uncertainty and volatility in bond prices.

Capital controls, which restrict the flow of capital in and out of a country, can insulate domestic bond markets from external shocks but may also reduce liquidity and efficiency.

Negative interest rates, implemented by some central banks, can squeeze bank profitability by reducing net interest margins, potentially leading to decreased lending and economic activity.

Forward guidance, where central banks communicate their intentions and expectations about future monetary policy, can influence long-term interest rates by shaping market expectations.