Financial Markets Flashcards
Investment
The act of redirecting resources from being consumed today so that they create benefits in the future; the use of assests to earn income or profit
Financial System
The system that allows the transfer of money between savers and borrowers
Financial Asset
Claim on the property or income of a borrower
Financial Intermediary
Institution that helps channel funds from savers to borrowers
Mutual Fund
Fund of savings that pools the savings of many individuals and invests this money in a variety of stocks, bonds and other financial assets
Finance Companies
Make loans to consumers and small businesses
Life Insurance
Provides financial protection for the family and other beneficiaries of the insured.
Pension Funds
Income that a retiree recieves after working a certain number of years or reaching a certain age
Diversification (and its importance)
The spreading out of of investments to reduce risk. dont put all your eggs in one basket
Portfolio
Collection of financial assets
Return
The money an investor recieves above and beyond the sum of money they initially invested
Prospectus
Investment report to potential investors
How do lenders offset risky loans?
By charging higher interest rates
Coupon Rate
The interest rate that a bond issuer will pay to a bondholder
Maturity
The time at which payment to a bondholder is due
Advantage of a municipal bond
Tax free
Par Value
The amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity
Yield
The annual rate of return on a bond if the bond were held to maturity
Savings bond
Low denomination bond issued by the US government
Corporate Bond
Bond that a corporation issues to raise money to expand its business
Junk Bonds
High risk bond that gained popularity in the 1980s and 1990s
Securities and Exchange Commision
Independent agency of the gov that regulates the financial markets nad investment companies
Bear Market
Steady drop in the market over a period of time
Bull Market
Steady rise in the market over a period of time
Municipal Bond
Bond issued by a state or local government or municipality to finance such improvements as highways, schools, etc.
Share
Portion of a stock
Capital Gain
The difference between the low price you pay for a stock and the high price you sell it for.
Capital Loss
The difference between the high price you pay for a stock and the low price you sell it for.
Stock Split
The division of a single share of stock into more than one share
Stockbroker
Person who links buyers and sellers of stock
Brokerage Firm
Business that specializes in trading stocks
Stock Exchange
A market for buying and selling stock
NASDAQ
Market that specializes in American high-tech and energy stocks
OTC Market
Electronic marketplace for stock that is not listed or traded on an organized exchange
Dow Jones Industrial Average (The Dow)
Index that shows how certain stocks have traded
Standard and Poor’s 500 (S & P 500)
Index that shows the price changes of 500 different stocks
Great Crash
The collapse of the stock market in 1929
Treasury Bill
Government bond that is repaid within 3 months to 1 year
Treasury Note
Government bond that is repaid within 2 to 10 years
Treasury Bond
Government bond that can be issued for as long as 30 years
US Savings Bond
Low-denomination bond issued by the United States government
