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Interest Rate

Annual interest expressed as a percentage of the amount borrowed or saved

Demand for loans curve

a downward sloping curve showing the negative relationship between the interst rate and the quantity of loans demanded, other things constant

Supply of Loans curve

an upward-sloping curve showing the positive relationship between the interest rate and the quantity of loans supplied, other things constant.

Market for loans

The market that brings together borrowers (the demanders of loans) and savers (the supplies of loans) to determine the market interest rate

Equilibrium interest rate

The only interest rate at which the quantity of loans demanded equals the quantity of loans supplied

Financial intermediaries

Banks and other institutions that serve as go-betweens, accepting funds from savers and lending them to borrowers


The ability to borrow now, based on the promise of repayment in the future.

Line of credit

An arrangement that allows borrowing up to a prescribed limit

Prime rate

interest rate charged by banks to their largest, most secure, and creditworthy customers on short-term loans; used as a guide for deciding interest rates for other borrowers


An asset owned by the borrower that can be sold to pay off the loan in the event the loan is not repaid.

Initial public offering(IPO)

The initial sale of corporate stick to the public


That portion of after-tax corporate profit paid out to shareholders

Retained earnings

That portion of after-tax corporate profit reinvested in the firm


A contact promising to repay borrowed money on a designated date and pay interest along the way


Corporate stock and corporate bonds

Vertical Merger

One firm combines with another from which it buys inputs or to which it sells output, such as a merger between a steel producer and an automaker

Conglomerate Merger

One firm combines with another firm in a different industry, such as a merger between a plastics maker and an electronics firm

Multinational Corporation(MNC)

A large corporation that makes and sells its products around the world.


organized and maintained as a legal corporation


being in cash or easily convertible to cash

Mutual fund

fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets; a regulated investment company with a pool of assets that regularly sells and redeems its shares

Municipal Bond

a bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks and schools

Corporate Bond

a corporation's written pledge that it will repay a specified amount of money with interest; A bond that a corporation issues to raise money to expand its business

Federal Bond

a bond issued by the federal agency

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