ECON 200 Handout 5 Key Terms

Question 1

Asset

Answer 1

Anything that one chooses to own because it will have redeemable value in the future.

Question 2

Nonmonetary Assets

Answer 2

All assets other than money (productive capital, natural resources, real estate, and gold)

Question 3

Wealth

Answer 3

The aggregate current value of assets

Question 4

Capital Gains

Answer 4

Newly created assets (financed by saving) as well as increases in the value of existing assets

Question 5

Expected Return

Answer 5

The expected return of an asset

Question 6

Risk

Answer 6

Uncertainty

Question 7

Risk Averse

Answer 7

Prefer less risk when the stakes are high

Question 8

Risk Loving

Answer 8

Prefer more risk when the stakes are low

Question 9

Consumer Durables

Answer 9

Things with good and asset qualitites

Question 10

Stock (Equities)

Answer 10

Made up of shares (partial ownership) of a company

Question 11

Stock Market

Answer 11

Market for stocks

Question 12

Public (Publicly Held) Companies

Answer 12

Companies whose ownership is shared via stocks

Question 13

Dividends

Answer 13

Profits distributed to stock holders

Question 14

Market Valuation

Answer 14

The aggregate value of a company’s stock, or the number of its shares times the going price of a share of the stock in the stock market

Question 15

Capital Losses

Answer 15

Decreases in the prices of existing assets

Question 16

Primary Bond Markets

Answer 16

Where newly issued bonds are sold

Question 17

Secondary Bond Markets

Answer 17

Where previously issued bonds are exchanged

Question 18

Real Interest Rate (r)

Answer 18

i=Nominal Interest Rate

pi=Interest Adjusted for Inflation

Question 19

Yield

Answer 19

The return on a stock

Question 20

Discount Rate

Answer 20

Percent of the difference between how much a bond sells for and how mush it pays (sells for $95 pays $100)

Question 21

Finance

Answer 21

The study of the management of assets

Question 22

Present Value

Answer 22

PV=Starting Value/(1+i)^time