1) page 9 third last paragraph- how does more demand lead to lower yields and inturn lower borrowing costs? 2) page 10 last paragraph- it says stock exchange does not cover futures and options..and also money market transactions(bills etc).. but arnt bills and all traded on the stock exchange?
1) Now that there is more money in supply, the demand for assets such as bonds increases. For bonds, this increases the price of the bonds (eg from 80 to 90) ... ... and so reduces the yield on bonds (eg from 3% to 2%) ... ... and so the cost of borrowing. 2) Futures and options are traded not on the stock exchange but via a clearing house. Money market instruments are traded not on the stock exchange, but via banks.
