Quiz 1 Vocab Flashcards
Security
a claim on the issuer’s future income or assets
Asset
any financial claim/ piece of property that is subject to ownership
Bond
debt security that promises to make payment periodically for a specified period of time
Bond Market
where corporations and government borrow to finance their activities and where IR are determined
Interest Rate
the cost of borrowing / the price paid for rental of funds
Financial Crises
major disruptions in financial markets that are characterized by sharp declines in asset prices (rises in IR) and the failures of many financial and non-financial firms
Monetary Theory
the theory that relates the quantity of money and monetary policy to changes in aggregate activity and inflation
Monetary Policy
management of money and IR (fed)
Primary Market
a financial market in which new issues of a security are sold to initial buyers by the corp/gov’t agency borrowing the funds
Secondary Market
financial market in which securities that have been previously issued can be resold
Exchange (2ndary) Market
where buyers and sellers of securities meet in one central location to conduct trade
Over the Counter (2ndary) Market
dealers at different locations who have an inventory of securities stand ready to buy/sell to any willing to accept prices
> US Gov’t Bond
Brokers
agents of investors who match buyers with sellers of securities
Agents
link buyers and sellers by buying and selling securities at stated prices
Money Market
financial market in which only short term debt instruments are traded (ie what Money Market Mutual Funds hold)
Capital Market
market in which longer-term debt and equity instruments are traded
Certificate of Deposit
a debt instrument sold by a bank to depositors that pays an annual IR of a given amount and at maturity pays back the original purchase price
Commercial Paper
short term debt instrument issued by large banks and well-known corporations
Repurchase Agreements
short term loans for which T-bills serve as collateral
Federal Funds Rate
IR on interbank loans
Mortgage Backed Securities
bond-like debt instrument backed by a bundle of individual mortgages whose interest and principal payments are collectively paid to holders of the security
Convertible Bonds
allows holder to convert them into a specified number of shares of stock up to maturity date (less IR payments for corp)
Euro Bonds
a bond denominated in a currency other than that of the country in which it is sold
Euro Currencies
foreign currencies deposited in banks outside home country
