Explain briefly each of the following economic terms. Try to be as concise as possible. Over-the-counter...

Explain briefly each of the following economic terms. Try to be as concise as possible.

Over-the-counter (OTC) market (as one kind of financial markets)
Secondary market (as one kind of financial markets)
Risk premium (of bonds)
Yield to maturity (of bonds)
Liquidity (of an asset)

Federal funds

Solutions

Expert Solution

A. OTC market: It is a market or exchange occurring in the absence of stock exchange. In this market the buyers and sellers of financial instruments directly come together to sell and buy securities at their own desired rates.

B. Secondary market: It is the market for already bought stocks and securities. In this market, all those financial instruments which have been issued before in time are traded.

C. Risk premium: It is the return achieved over and above the risk free rate of return of the investment in bonds.

D. Yield to maturity: As the name suggests, it is the yield return expected if the bond is kept till maturity.

E. Liquidity of an asset: It is the speed or rate at which the asset can be readily converted into cash.

F. Federal funds: These are the funds exchanged i.e. borrowed and lent among banks and other depository institutions to maintain their overnight bank reserves balance.

Rahul Sunny answered 2 years ago

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