Quiz 5 Flashcards
What does the Federal Reserve Bank and D.O.T do ?
Back your money
What does the bank protect ?
Theft
Us
Interest
What are travel checks ?
The bank accept your checks
A replacement for cash so you don’t have to carry it
Checking
M1 money Visa debt Checks Demand account Liquid asset
Savings
M2 money
Higher interest
Take money out a minimum of 5 times month
Liquid asset (not as much, just thicker)
Why do you only take money out of your saving 5 times a month ?
Helps you save
Helps banks
Reserves required
Certification of Deposit (CD)
Pay higher rates
Frozen savings account
A savings account you can’t touch
Can it be short or long term ?
Both
If you were to take out money before the end of your time, what would you have to pay ?
Penalties
What do most CD’s do ?
Lock in interest rate
What is the number one way the bank make their money ?
Loans
Paper money
Fiat
Who issues the credit cards ?
The bank
What is a credit ?
Payments per cardholder agreement with interest
Merchant fees: 2 1/2-3%
What is a charge card ?
100% payed off each month
Annual fee: 4-5%
Example: Amex
What is a debt card ?
A card used to withdraw money from a bank account
What is a credit card ?
A card entitling its owner to buy goods and services based on the owner’s promise to pay for those goods and services
Check fraud
Basically jail time
What is repossession ?
Default on loans
Example: default on your car loan, the bank can take the car
What is foreclosure ?
The seizure of property form the borrowers who repay their loans
Secure loans
Collateral
What is a collateral ?
Anything you put up to secure a loan
Example: a collateral for a house loan is your house
What would probably would qualify for loan/mortgage ?
Prequalified
What is a appraisal ?
Estimation of value
What is a principle ?
The amount of money borrowed
What is an interest ?
The price paid for the use of borrowed money
How much does the bank have of your money ?
Only a fraction of your money
Why wouldn’t a business decrease in a recession ?
They are always in a business cycle
What is cash poor ?
Companies would become cash poor because of expansion
(Example from class)
Record year for a new shoe store …… what could happen ?
Expand- more $$$
- more product
- more employees
- more infrastructure
Who is the #1 interest ?
Shareholders
What are shareholders ?
People who own stock
What happens if companies keep expanding ?
The greater the risk
What is Cash is King ?
Expression sometimes used in analyzing businesses or investments portfolios
Example: A house is selling at $300,000, someone offers to pay the full 300,00 next week but someone else has the a check ready but for $275,000 ….. you take the $275,000
An institution for receiving, keeping, and lending money
Bank
A widespread panic in which many people try to redeem their paper money at the same time
Bank run
The direct exchange of one set of goods or services for another
Barter
A bank that can lend to other banks in time of need
Central bank
A person or institution to whom money is owed
Creditor
Coins and paper bills used as money
Currency
Failing to pay back loans
Default
Money in a checking account that can be paid out “on demand” or at any time
Demand deposit
Objects that have value because a government has decreased that they are an acceptable means to pay debts
Fiat money
A banking system that keeps only a fraction of its funds on hand and lends out the remainder
Fractional reserve banking
A monetary sytem in which paper money and coins had the value of certain amounts of gold
Gold standard
A paper currency issued during the civil war
slag for cash
Greenback
The ability to be used as, or directly converted into, cash
Liquidity
A bank that belongs to the Federal Reserve System
Member bank
Anything that serves as a medium of exchange, a unit of account, and a store of value
Money
All the money available in the United States economy
Money supply
A specific type of loan that is used to buy real estate
Mortgage
A bank charted by the federal government
National Bank
