viii Contents Investment Intermediaries 37 Regulation of the Financial System 37 Increasing Information Available to Investors 37 Ensuring the Soundness of Financial Intermediaries 38 Financial Regulation Abroad 40 Summary Key Terms Questions Web Exercises 40 41 Application Simple Present Value 61 42 Application How Much IsThat Jackpot Worth? 61 Four Types of Credit Market Instruments 62 Yield to Maturity 63 Medium of Exchange 44 Unit of Account 45 FYI Money in a Prisoner-of-War Camp and Modern Prisons 46 Store of Value 46 Evolution of the Payments System 47 47 48 48 49 49 Measuring Money 49 FYI Are We Headed for a Cashless Society? 50 The Bank of Canada s Monetary Aggregates 50 FYI Where Are All the Dollars? 52 Money as a Weighted Aggregate 53 How Reliable Are the Money Data? Summary Key Terms Questions Quantitative Problems Web Exercises Present Value 59 41 What Is Money? 43 Learning Objectives 43 Preview 43 Meaning of Money 43 Functions of Money 44 Understanding Interest Rates 58 Learning Objectives 58 Preview 58 Measuring Interest Rates 59 Application How to UseYour Financial Calculator 60 CHAPTER Commodity Money Fiat Money Cheques Electronic Payment E-Money CHAPTER 54 Application Yield to Maturity on a Simple Loan 63 Application Yield to Maturity on a Fixed-Payment Loan 65 Application Yield to Maturity on a Coupon Bond 66 Application Yield to Maturity on a Perpetuity 69 Global NegativeT-Bill Rates? Japan Shows the Way 70 The Distinction Between Interest Rates and Returns 71 Application Calculating the Rate of Return 72 Application Calculating the Rate of Capital Gain 73 Maturity and the Volatility of Bond Returns: Interest-Rate Risk 74 FYI Helping Investors to Select Desired Interest-Rate Risk 75 Summary 76 The Distinction Between Real and Nominal Interest Rates 76 54 Application Calculating Real Interest Rates 77 55 FYI With Real Return Bonds, Real Interest Rates Have Become Observable in Canada 79 55 56 56 PA RT I I Financial Markets 57 Crisis and Response: Credit Market Turmoil and the Stock Market Crash in October 2008 57 Application Calculating the Principal and Coupon Payment of Real Return Bonds 79 Summary Key Terms Questions Quantitative Problems Web Exercises 80 80 80 80 81