investment bankers and attorneys, and entails compliance with reporting requirements to shareholders and

government agencies, such as the federal Securities and Exchange Commission (SEC).

17.2 How Households Supply Financial Capital

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Show the relationship between savers, banks, and borrowers

• Calculate bond yield

• Contrast bonds, stocks, mutual funds, and assets

• Explain the tradeoffs between return and risk

The ways in which firms would prefer to raise funds are only half the story of financial markets. The other half
is what those households and individuals who supply funds desire, and how they perceive the available

choices. The focus of our discussion now shifts from firms on the demand side of financial capital markets to

households on the supply side of those markets. We can divide the mechanisms for savings available to
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