Quiz 6 Flashcards
What is not a financial asset ?
Financial Intermediaries
What is the main difference between a Finance Company and a Bank ?
A Finance Company doesn’t have savings accounts
The main purpose of Life insurance is to provide financial protection for the family or other beneficiary of the uninsured
True
A Pension is guaranteed, no matter what job you work in, if you work at least 20 years
False
Define diversification
Splitting among different investments
Mutual funds
Pool the money of investors together and invest in different assets
Define Liquidity
Money in a account turns into cash
Complete the sentence: the higher the risk
The higher the potential reward
Example of financial intermediary
Mutual funds
Your book mentions four types of risk. Name one
Credit risk
My Maddox believes Blockchain might be better long-term investment than cryptocurrency. Why does he feel this way ?
Cryptocurrency can disappear one day
Blockchain
Way it encrypts the currency
Cryptocurrency
A form of digital currency
What does cryptocurrency use ?
Cryptography
Cryptography
Art of writing and solving codes
Consumerism
The protection or promotion of the interest of consumers
What are we suppose to do in stock ?
Buy low sell high
Financial intermediaries
Institution that helps channel funds from savers to borrowers
Financial intermediaries include
Banks, savings and loan associations, and credit unions Finance companies Mutual funds Life insurance companies Pension funds
Parts of a check
Routing number Account number Check number Memo line Sign line Pay to line
Endorsing
Signing of a check
What happens when the bank gets your name wrong on the check ?
You can still sign it off since the bank made the mistake
Assets
Something you own that has value
FDIC
Funds that are protected by the government
Finance company
Make a loan to consumers and small business
Principal in deposit
The amount of money you deposit
Stock broker
Buys part of the company
Stock
Options
Commodities
Capital
Money
Issue corporate bond
Government issue bonds
Privately own
Own it yourself
Publicly trade company
Anyone in public can own it
Unrealized gain/loss
Until you sell or buy
Mutual funds (Another def)
A way to invest in the stock market with automatic diversification
4 types of risk
Credit risk
Liquidity
Inflation
Time
Credit risk
Risk a chance a default on your loan
- don’t co-sign a loan
Liquidity
If you need the money, you may not get it when needed
Inflation
#1 risk of money Your money won't keep up with inflation
Time
Your money can be tied up and you can’t use it
What the most active account ?
Your checking
How do you take money out of a checking account ?
ATM
Check
ACH
Debit Visa card
Emergency savings
1 thing to keep you out of bankruptcy
Have 3-6 month living savings
Have around 6,000-12,000
Regular savings
1,000
Best to have all along with emergency saving
Money market
Mutual funds invest in T-bills
What can’t savings account keep up with ?
Inflation
Bond
Loan
Borrowing money
Who issues bonds ?
Government
Companies
S.E.C
Securities Exchange Commission
over sees corp bond
Corp bond
Corp issue bonds to help raise money
Two types of bond ratings
Moody’s
S and P
Difference between AAA rating and a D rating
AAA- smaller risk
Small interest rate
D- higher risk
High interest rate
What happens when a individual buys a bond ?
They are given money to a business or government
Creditor priority
IRS Bond holders Banks secured collateral A/P Employees
Stock Manipulation
Purposely influence the price of the stock (up or down)
Coupon Rate
The interest rate that a bond issuer will pay to a bond holder
When you buy a bond from Vegas, who is the issuer and the bondholder ?
Bond issuer is Vegas
Bondholder is you
Issuer
Borrower
Gets money upfront
Bondholder
Loaner
Gives the money
Maturity
The time at which payment to a bondholder is due
typically 10, 20, or 30 years
Par value
The amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity
Creditors
Anyone in the business you own money to
