more detailed treatment of the different kinds of financial investments like bank accounts, stocks and bonds,

see the Financial Markets chapter.

Who Demands and Who Supplies in Financial Markets?

In any market, the price is what suppliers receive and what demanders pay. In financial markets, those who

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4.2 • Demand and Supply in Financial Markets 97

supply financial capital through saving expect to receive a rate of return, while those who demand financial

capital by receiving funds expect to pay a rate of return. This rate of return can come in a variety of forms,

depending on the type of investment.

The simplest example of a rate of return is the interest rate. For example, when you supply money into a

savings account at a bank, you receive interest on your deposit. The interest the bank pays you as a percent of

your deposits is the interest rate. Similarly, if you demand a loan to buy a car or a computer, you will need to
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