Chapter 1 Week 1 Flashcards
What are financial markets?
Markets where those with excess funds transfer money to those with a shortage of funds.
What is a security?
aka financial instruments is a claim on the issuer’s future income or assets.
What are assets?
any financial claim or piece of property that is subject to ownership.
What are bonds?
a debt security that promises to make payments periodically for a fixed period of time.
What is an interest rate?
the cost of borrowing or the price paid for the rental of funds (often expressed as cost per $100).
What is a stock market?
market were claims on the earnings of corporations (shares of stock) are traded.
What is common stock?
represents shares of ownership in a corporation, a mechanism for raising funds in a corporation.
What is the foreign exchange market?
market for funds to be transferred from one country to another.
What is the foreign exchange rate?
the price of one country’s currency in terms of another is determined.
Define the structure of the financial system.
complex interconnection of private sector financial institutions, insurance companies, mutual funds, finance companies, and investment banks.
Who are financial intermediaries?
Institutions which take money from people who have saved capital and turn that money into loans for people who need capital.
What is a financial crises?
Major disruption in financial markets that characterized by sharp declines in asset prices and failures of financial, and non financial firms.
What is a central bank?
Government agency responsible for the conduct of monetary policy.
What is the Fed?
The Federal Reserve System, the central bank of the US.
What is monetary policy?
The management of interest rates and the quality of money supply.
