Chapter 11 Flashcards
Investment
Redirecting resources from being consumed today so that they may create benefits in future
Financial system
Allows transfer of money between savers and borrowers
Financial asset
Claim on the property or income of a borrower
Financial intermediary
Institution that helps channel funds from savers to borrowers
Mutual fund
Fund that pools savings of many individuals and invests this money in a variety of financial assets
Diversification
Spreading out investments to reduce risk
Portfolio
Collection of financial assets
Prospectus
Investment report to potential investors
Return
Money an investor receives above and beyond the sum
Coupon rate
Interest rate that a bond issuer will pay to a bond holder
Maturity
Time at which payment is due to bondholder
Par value
Amount an investor pays to purchase a bond and repaid to investor of maturity
Yield
Annual rate of return on a bond if bond were held maturity
Savings bond
Low-denomination bond issued by the United States government
Municipal bond
Bond issued by state or local government or municipality to finance improvements as highways….etc.
Corporate bond
A bond that a corporation issues to raise money to expand its business
Securities and exchange commission
Independent agency of the government that regulates financial markets and investment companies
Junk bond
A lower-rated, potentially higher-paying bond
Capital market
Money lent for periods longer than a year
Money market
Money lent for periods of less than a year
Primary market
Selling financial assets that can only be redeemed by original holder
Secondary market
Reselling financial assets
Share
Portion of stock
Equities
Claims of ownership in a corporation
Capital gain
Difference between a higher selling price and lower purchase price resulting in financial gain for seller
Capital loss
Difference between a lower selling price and a higher purchase price resulting in financial loss to a seller
Stock split
Division of a single share of stock into more than share
Stockbroker
Person who links buyers and sellers of stock
Brokerage firm
Business that specializes in trading stocks
Stock exchange
Armed for buying and selling stock
OTC Market
Electronic marketplace for stocks and bonds
Nasdaq
American market for OTC securities
Futures
Contracts to buy or sell at a specific date in the future at a price specified today
Options
Contracts that give investors the choice to buy or sell stock and other financial assets
Call option
Option to buy shares of stock at a specified time in the future
Put options
Option to sell shares of stock at a specified time in the future
Bull market
Steady rise in the stock market over a period of time
Bear market
Steady drop in the stock market over a period of time
The Dow
Index that shows how certain stocks have traded
S & P 500
Index that shows the price changes of 500 different stocks
Great Crash
Collapse of the stock market in 1929
Speculation
Practice of making high-risk investments with borrowed money in hopes of getting a big return
