Chapter 13

Question 1

Depository institutions

Answer 1

Commercial banks
Savings banks
Credit Unions

Question 2

Non-depository institutions

Answer 2

Finance companies
Insurance companies
Brokerage firms
Pension funds

Question 3

Risk factors for loans

Answer 3

Income
Employment status
Credit history
Ability to make only low down payment

Question 4

Money multiplier

Answer 4

Amount by which an initial bank deposit will expand the money supply

Question 5

How does fed control money supply

Answer 5

Change reserve requirement
Change discount rate
Conduct open market operations

Question 6

Prime rate

Answer 6

Rate that banks charge their best customers

Question 7

Crowdfunding

Answer 7

Practice of obtaining needed funding by soliciting contributions from a large number of people

Question 8

Equity crowdfunding

Answer 8

Investors fund businesses in return for a small share of business

Question 9

Angels

Answer 9

Wealthy individual willing to invest in your business

Question 10

Venture capitalists

Answer 10

Usually lend larger amounts than angels

Question 11

Primary market

Answer 11

Stock markets help companies raise funds by making the initial sale of the company’s stock to the public

Question 12

Secondary market

Answer 12

Stock markets provide a place where investors can trade already issued stock to each other

Question 13

Prospectus

Answer 13

Written offer to sell Securities which also provides useful info to prospective buyers

Question 14

Insider trading

Answer 14

Buying or selling of securities using important “private” info about the company before it is made public

Question 15

Equity financing

Answer 15

Selling stock

Question 16

Debt financing

Answer 16

Selling bonds

Question 17

Common stock

Answer 17

If company does well, investor does well

Question 18

Preferred stock

Answer 18

Receive a fixed dividend each year even if the company does very well

Question 19

Bonds

Answer 19

Debt Securities that require annual interest payments to bondholders