Chapter Outline

15.1 A Brief Overview of the Capital Market

15.2 Present Value

15.3 The Demand for Capital

15.4 The Supply of Capital

15.5 Equilibrium in the Capital Market

AFTER STUDYING THIS CHAPTER YOU WILL BE ABLE TO

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 Learning Objectives (LO)

1. describe how the capital market brings together the borrowing

decisions of firms with the lending decisions of households.

2. compute the present value of an asset that delivers a stream of

future benefits.

3. explain why the demand for investment is negatively related to

the interest rate.