Chapter 8-9 and test 4 Flashcards
The commitment of resources to a project or purpose that is expected to bring future profit to the investor
Investment
One who borrows money or capital
Debtor
One who lends money or capital
Creditor
The most common type of account
Checking account
An account that allows checks to be written up to the dollar amount that the account holder has deposited.
Transaction account
An account holder’s written order that authorizes his bank to withdraw funds from his account
Check
A bank account that allows the account holder to earn interest on his deposits
Savings account
An account that guarantees a certain interest rate and has a specified maturity date
CD, Certificate of Deposit
An account that allows limited transactions and pays an interest rate that changes with the demand for loans
Money market account
Governmental agency that insures private banks and accounts up to $100,000
Federal Deposit Insurance Corporation (FDIC)
A contract between two parties in which one party protects the other against certain types of loss in exchange for payments called Premiums
Insurance
An arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work
Pension plan
Plan in which an employer promises to pay an employee a certain amount per month after retirement based upon the employee’s salary and length of service
Defined benefit plan
Plan in which an employer does not promise an employee any certain amount upon retirement and the employee, the employer, or both are required to contribute regularly to a special tax-sheltered retirement account set up for the employee
Defined contribution plan
The resources corporations gather by selling ownership in their businesses
Stocks
A legal entity which is distinct from the people who own it
Corporation
Equal portions of a corporation’s stock
Shares
Owns the hole business
Stockholder
If a corporation fails or declares bankruptcy, the individual stockholders do not personally have to pay the firm’s creditors
Limited liability
Shares of a corporation’s profit
Dividends
A document that guarantees the bond holder the amount of his original investment plus a specified rate of interest by a certain date
Bond
Investment companies that combine the resources of all their shareholders and invest the money in a wide variety of areas
Mutual funds
Assets that flow easily since they can be converted into other investments or cash without much time or difficulty
Liquid investments
Three elements to determine how much your investment would grow
Time, rate of return, and amount invested
American form of social insurance was enacted in 1935
Social Security Act
Social Security Administration
Anything that is generally accepted as a means of payments
Money
The three purposes of money
- Be a medium of exchange
- Provide a measure of value
- Provide a store of value
The direct exchange of one good for another good without a standard form of money passing from hand to hand
Barter
The six characteristics of money
Portability
Durability
Homogeneity
Divisibility
Constancy
Intrinsic valuableness
Coined, metallic money
Specie
To lower the quality or value of something as in debasement of money
Debase
The asserted value
Face value
The idea that people will save forms of money that seem more stable and valuable and spend forms of money that seems less valuable; named after Sir Thomas Greshman’s observation that “bad money drives out good”
Gresham’s Law
When the level of prices in the market rises because too much money is in circulation
Inflation
If prices decrease because money seems more valuable and stable
Deflation
Any form of money that has been declared a valid means of payment
Legal tender
Gold, silver or platinum, usually found in the form of bars, ingots, or plates
Bullion
A system which allows banks to hold less than 100 percent of deposits in reserve
Fractional reserve banking
Legal tender that is backed by nothing but a government’s promise
Fiat money
Most narrowly defined part of the money supply consisting of the money in transaction accounts, traveler’s checks, and all coins and currency held outside banks
M1
Assets that can be easily converted into M1 because they are highly liquid
Near-monies
That part of the money supply consisting of M1 plus noncheckable savings deposits, money market mutual funds and similar deposits, and time deposits worth less that $100,00
M2
That part of the money supply consisting of M2 and time deposits worth over $100,000
M3
Agency that prints money
United States Department of the Treasury
The central banking network of the United States ultimately responsible for forming American monetary policy and for controlling the national money supply
Federal Reserve System
Group of appointed officials who direct and supervise the Federal Reserve System
Board of Governors
The Federal Reserve Committee that makes decisions regarding the buying and selling of government securities
Federal Open Market Committee
Twelve central locations, one in each of the Federal Reserve districts, that implements the policies adopted by the Board of Governors
Federal Reserve Banks
Three main tools of the Federal Reserve to increase or decrease the amount of money circulation
Open market operations
Reserve ratios
Discount rates
A period, usually six months or longer, during which the economy recedes, or declines
Recession
The theory that the variation in the money supply is the main source of economic fluctuations
Monetarism
“Chicago school of ecomonics”, Monetarism
Milton Friedman
The three main components that make up the core of the Federal Reserve System
Board of Governors
Federal Open Market Committee
Federal Reserve Bank
What does RND stands for?
Research and development
Where does the capital for RND comes from?
Private sector
What industry provides a lot of capital for research and developmen?
Insurance companies
Knowing that the CD is less risky ,the rate of return would be higher or lower?
It would not be high
Each owner of a corporation holds?
Shares
This stock holder usually does not have a vote
Preferred stock
The dividend is fixed does not change
Preferred stock
Gets paid first before the other stockholders
Preferred
Which stockholder is riskier? Common or preferred?
Common
Would the interest in the common stock is riskier, the interest would be lower or higher?
Higher
Safest form of investment
Bond
Of the three elements to determine how much your investment would grow, which one is the most importan?
Time
Why the social security savings is not a saving?
Because they spend the money
Collateral
Foreclosure
Premium
Cowpay
ROA
IPO
Differences between debit and credit card
