Chapter 9 Flashcards
Money available after taxes have been paid
Disposable Income
The amount of money in an account
Balance
An account can be converted into cash with little to no loss in interest payments
Liquidity
The saver leaves money in an account for a specific amount of time. Savers who open time deposits usually buy certificates of deposit or savings bonds
Time Deposits
The length of time that money must be deposited
Maturity
The percentage of people’s disposable income
Savings Rate
When people exchange their money for something of value, expecting to earn a profit in the future
Investment
A spending and saving plan which lists fixed expenses and flexible expenses
Budget
Payments that remain constant from month to month, includes mortgage and insurance
Fixed expenses
Payments that vary from month to month, includes food and entertainment
Flexible expenses
Why people Save
Major purchases, Large bills, Unexpected expenses, Long-term expenses, Inheritance
The risks and rewards of investing
You have a chance to make a profit, but also have a chance to lose money
Types of Savings
Savings account (Regular or money market account where you give money for a certain amount of time), Time deposits (CD’s, leave money for an extended period of time), Savings bond (Give out money and be paid back with interest
Types of Investment
Financial investment - when property ownership changes hands but nothing new it produced
Real investment - When investors use money to create something new (buying a piece of land and building a mall)
Stocks—What are they and how can they be beneficial— The process of trading them
Parts of the company that you can buy. Can gain a profit by selling at a higher price. Limited liability, can only lose what you invest
Determinants of Stock
Supply of the stock, Health of the company, Corporate finance, External forces, Investor expectations
Types of Bonds
Corporate - Loan money to a corporation that agrees to pay you back
Government - Loan money to governments
The Credit Card
Allows you to spend money you do not have, and you are required to pay it back. If you do not pay it back on time you need to pay interest. Makes large purchases more affordable
Splitting shares into two, decreasing the price by half, and giving shareholders two shares for every share held before the split
Stock split
The total cost of credit expressed as a yearly percentage
Annual Percentage rate
Charging interest above the
government limit, which is illegal
Usury
A legal declaration of inability to pay debts. Remains on a persons credit history for 14 years, and makes it difficult for them to borrow money or receive credit
Bankruptcy
Money invested in entrepreneurial enterprises. Encouraged economic growth by helping entrepreneurs develop an idea into a product, improving production facilities, or finance product distribution
Venture Capital
The difference between the higher selling price and the lower original purchase price
Capital Gain
An investor who sells at a lower price than the purchase price
Capital loss
Work for brokerage firms and link buyers and sellers of stock. Earn money by collecting a fee on each transaction
Brokers
Buys and sells large blocks of stock. Buy stock when offered buy a company, and sell that stock to the public
Investment banking
When the dow steadily rises over a period of time
Bull market
When the dow average falls over a period of time
Bear market
Interest on money owed to a bondholder
Yields
Investors trade various types of products called futures instead of trading stock. Includes agricultural products, industrial products, and precious metals. They are required to sell after a certain period of time no matter what.
Futures
A fact sheet containing data on the company’s finances. Used by investors to evaluate securities that are offered for sale
Prospectus
Equal amounts that the principal and interest are divided into when paying loans
Installment
An estimation of the probability of repayment
Credit rating
A business that specializes in collecting financial information about consumers
Credit Bureau
The total cost of credit expressed in dollars and cents
Finance Charge
