Chapter 9 (sources of capital)

Question 1

The exchange of property ownership and payment between two individuals or groups is known as

Answer 1

financial investment

Question 2

Which of the following is an example of a flexible expense?

Answer 2

A monthly rent payment

Question 3

A (blank) is a person who lends money to a company.

Answer 3

bondholder

Question 4

Economists measure savings to

Answer 4

determine the strength of the economy

Question 5

State and federal deposit insurance provides (blank) for people who deposit money in a bank or some other type of financial institution

Answer 5

security

Question 6

The total cost of credit expressed in dollars and cents

Answer 6

finance charge

Question 7

The total cost of credit expressed in percentage form

Answer 7

annual percentage rate

Question 8

Interest on the money that is owed to a bond holder

Answer 8

yield

Question 9

Type of payment that remains the same from month to month

Answer 9

fixed expense

Question 10

Person who links the buyers and sellers of stock

Answer 10

broker

Question 11

Equal amounts into which repayment of a loan is divided

Answer 11

installments

Question 12

Charging interest above the legal limit

Answer 12

usury

Question 13

Practiced when investors use money to create a new capital good

Answer 13

real investment

Question 14

The difference between the higher selling price and lower original price of stock

Answer 14

capital gain

Question 15

Creditors develop a (blank) to estimate the probability of a borrower repaying a loan.

Answer 15

credit rating

Question 16

Stock prices can be affected by (blank), such as the assassination of a world leader.

Answer 16

external forces

Question 17

The non-consumption of disposable income is called (blank).

Answer 17

saving

Question 18

Which of the following is an example of a fixed expense?

Answer 18

A monthly mortgage payment

Question 19

The (blank) of CDs range from less than a month to several years.

Answer 19

maturities

Question 20

Which of the following can consumers in a free-enterprise economy choose to do with their money?

Answer 20

• save it
• spend it
• consume it

Question 21

A stock split is generally beneficial to stockholders because

Answer 21

stock prices tend to rise afterwards

Question 22

In saving, the cost of high (blank) is low interest rates.

Answer 22

liquidity

Question 23

Most financial institutions are protected by

Answer 23

• state and federal deposit insurance
• state and local regulations
• local zoning laws

Question 24

A stock is “blue chip” when

Answer 24

• the company produces high-quality products and has good long term prospects
• it has long term stability and value
• it is in demand at any time

Question 25

Capital accumulation promotes economic (blank).

Answer 25

growth

Question 26

An example of a time deposit is a

Answer 26

• certificate of stock
• credit card
• savings bond

Question 27

When you deposit money in a financial institution, you receive payment called (blank) in return for the use of your money.

Answer 27

interest

Question 28

Which of the following is a reason for saving money?

Answer 28

• To make a major purchase, such as a car or house
• For unexpected expenses, such as major home repairs
• For long term expenses, such as college tuition

Question 29

The (blank) tends to drop during periods of high unemployment.

Answer 29

savings rate