ch 19

Question 1

capital gain

Answer 1

gain from selling something later for a higher price

Question 2

sole proprietorship

Answer 2

company run by an individual

Question 3

simple interest

Answer 3

interest rate, only principle amount

Question 4

mutual funds

Answer 4

buy range of stocks or bonds, allows diversity

Question 5

financial intermediary

Answer 5

receives money from savers, gives to borrowers

Question 6

shares

Answer 6

stock divided into portions

Question 7

bond holder

Answer 7

owns bonds, receives payment

Question 8

venture capital

Answer 8

invest in new company that is still small but has potential to grow a lot

Question 9

checking account

Answer 9

little or no interest, easy to get money, debit card

Question 10

bond

Answer 10

borrower agrees to repay w/ interest over a period of time

Question 11

risk

Answer 11

uncertainty of profitability of an investment or project

Question 12

public company

Answer 12

sold stock to public, can be bought and sold by investors

Question 13

diversification

Answer 13

invest in range of different stock to reduce risk

Question 14

equity

Answer 14

value homeowner has after selling and repaying loans for a house

Question 15

partnership

Answer 15

run by a group

Question 16

liquidity

Answer 16

how easy money or financial asset is to trade for a good/service

Question 17

compound interest

Answer 17

interest rate on principle & accumulated

Question 18

savings account

Answer 18

pays interest, getting money requires going to bank or ATM

Question 19

corporate governance

Answer 19

institutions that watch over top executives owned by shareholders

Question 20

index fund

Answer 20

mutual funds, to mimic performances of the market

Question 21

high yield bond

Answer 21

high interest because of high chance of default

Question 22

dividend

Answer 22

direct payment from firm to investors

Question 23

actual rate of return

Answer 23

total rate of return, capital gains & interest @ end of period of time

Question 24

initial public offering (IPO)

Answer 24

first shares firm sells to investors

Question 25

certificate of deposit (CD)

Answer 25

way to deposit funds & leave @ bank, for higher interest rate

Question 26

junk bonds

Answer 26

high yield bond

Question 27

corporate bond

Answer 27

issued by a firm that wants to borrow

Question 28

expected rate of return

Answer 28

how much investment is expected to return. by interest, capital gain, or increased profitability

Question 29

present value

Answer 29

bond’s current price @ a given time

Question 30

private company

Answer 30

owned by who runs company day-to-day

Question 31

debit card

Answer 31

immediately deducted from checking account

Question 32

coupon rate

Answer 32

interest rate on bond, annual or semi-annual

Question 33

stock

Answer 33

claim on partial ownership of firm

Question 34

treasury bond

Answer 34

by federal government or US Department of Treasury

Question 35

shareholders

Answer 35

own some shares of stock

Question 36

corporation

Answer 36

owned by shareholders, limited liability for debt but share of profit, private or public

Question 37

municipal bonds

Answer 37

bond by cities wanting to borrow

Question 38

face value

Answer 38

amount bond issuer or borrower agrees to pay

Question 39

bond yield

Answer 39

rate of return that bond is expected to pay @ purchase time

Question 40

maturity date

Answer 40

date that bond must be repaid