quizlet words Flashcards
banking
The issuing, exchanging, loaning, and custody of money and the extension of credit.
payer
The person who writes a check.
2-for-1 stock split
When each stockholder receives an additional share for each share held, but the value of each share is reduced by half: two shares now equal the original value of one share before the split.
3-for-2 stock split
When each stockholder receives an additional share for every two shares held, but the value of each share is reduced by 2/3: three shares now equal the original value of two shares before the split.
NOW
Negotiable Order of Withdrawal. An interest-bearing checking account at a bank or savings and loan.
share draft
A check written on an account at a credit union.
pension plan
A qualified retirement plan set up by a corporation, labor union, government, or other organization for its employees.
integrated pension plan
Plan that is tied to a person’s payments into Social Security. This amount will be used in calculating the total benefit that the individual will receive upon retirement.
defined benefit plan
A company retirement plan, such as a pension plan, in which a retired employee receives a specific amount based on salary history and years of service, and in which the employer bears the investment risk. Contributions may be made by the employee, the employer, or both.
defined contribution plan
A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. There are restrictions as to when and how you can withdraw these funds without penalties.
equation of exchange
(M V = P Q) M = money supply V = velocity of money P = average price level of goods Q = index of expenditures Explains relationship between money and prices.
bear market
Bad times, prices are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
bull market
Good times, prices are rising or are expected to rise. Characterized by optimism, investor confidence and expectations that strong results will continue.
discount loan
With this type of loan, borrowers receive less than the full amount of the loan and repay the full amount at maturity.
fidelity bonds
Used to protect the firm against dishonesty of employees/agents. Covers various forms of losses, including fraudulent trading, theft and forgery.
401(K)
A qualified plan established by employers to which eligible employees may make tax-deferred contributions (often matched by the company) to a trust.
tax-sheltered annuity
A type of annuity that allows an employee to make contributions from his or her income into a retirement plan. Contributions are deducted from the employee’s income and are not taxed until withdrawal.
SEP-IRA
A retirement plan created to benefit self-employed persons and small business owners. Contributions to a SEP IRA are typically 100% tax deductible and earnings grow tax deferred.
SIMPLE IRA
Savings Incentive Match Plan for Employees
A retirement plan sponsored by companies with fewer than 100 employees; though it may be structured as a 401(K), it avoids some of the administrative fees and paperwork of those plans.
Traditional IRA
Type of IRA where contributions are tax-deductible at the time they are deposited and both the principal and the income earned in the account are taxed as regular income when they are withdrawn as distributions.
Roth IRA
Type of IRA where taxes are paid on contributions, but withdrawals are not taxed at all. Does not require you to start making withdrawals at a certain age, and allows an individual to make a qualified withdrawal up to $10,000 for a first time home purchase.
IRA
Individual Retirement Account. A tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). Can be established at a bank, mutual fund, or brokerage.
credit card
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. They have higher interest rates (around 19% per year) and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual’s credit rating.
One of the most popular and widely accepted forms of payment for consumer goods and services in the U.S.
debit card
An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. This form of payment also removes the need for checks as it immediately transfers money from the client’s account to the business account.
The major benefits to this type of card are convenience and security.
Securities Investor Protection Corporation
Insures investors accounts for up to $500,000 (including $100,00 in cash), in the event of fraud or the bankruptcy of a member securities brokerage.
add-on clause
Provision contained in an installment contract. An add-on clause creates a security interest in the earlier goods until full payment is made on the new goods. By this clause, the earlier purchases serve as the security for new purchases.
True or false? Purchasers of automobile liability insurance can reduce their premium costs by agreeing to a deductible.
false
liquid assets
Assets that are easily convertible to cash, such as those in savings accounts, stocks, and US savings bonds.
A tight money policy followed by the Federal Reserve would most likely result in:
higher interest rates
renewable term life insurance
Best for short-term life insurance. Policies that start out with low premiums, but increases each time the term is renewed. Policyholders are guaranteed renewal for succeeding terms even if they have a serious illness.
Lenders are required to disclose the true costs of credit to borrowers, including the total amount of interest charged over the life of a loan and the amounts of monthly payments by this federal law:
Truth in Lending Act
When real estate agents have the bank collect money from buyers and put it into the seller’s account, they are using the bank’s _____ services.
escrow
municipal bonds
Bonds issued by a local government, or its agencies. Most likely would have the lowest interest rate.
balance sheet
A financial statement that shows the firm’s assets and liabilities.
property damage liability
Insurance coverage that pays for the damages to the car and possessions (including stationery objects such as trees/mailboxes) of the other party in an accident that is your fault.
comprehensive physical damage
Insurance coverage that covers the cost of damages to your car caused by natural disasters, fire, robbery, theft, vandalism, and more.
personal injury protection
Insurance coverage that covers medical expenses, although it depends based on plan/provider, usually it covers most medical costs, hospital costs, Income continuation, lost wages and funeral costs.
price-to-earnings ratio
Ratios that relate a stock’s price to the firm’s profits, thus allowing investors to evaluate stock prices.
mutual company
A type of insurance company that returns part of the profits of the company to its policyholders.
independent agency
Created by Congress to address concerns that go beyond the scope of ordinary legislation.
passbook accounts
Another way of saying “savings accounts.”
Depositors are the owners of ______.
credit unions
prime rate
Interest rate charged by banks to their best corporate borrowers.
whole life insurance
Life insurance policy that remains in force for the insured’s whole life. Advantage = cash values can build up that policy holders can borrow against later.
teller
An entry-level position at a financial institution.
euro
A new currency used by members of the European union.
commercial bank
Primary lending function is to help business owners who want to expand.
suitability
An important element in determining proper business practices. Financial professionals recommend financial products based on the client’s financial, social, and emotional circumstances
defensive stocks
Those likely to have share prices that are more volatile that those of growth stocks. Most popular when economic outlook is not very positive.
trust department
This part of a bank would be most likely to manage money for a 12-year-old who received an inheritance.
cashier’s check
A check drawn on the bank’s own funds, often requested by seller to be assured of payment.
M1
The narrowest definition of the money supply. Includes currency, travelers’ checks, and balances in checking accounts.
fractional reserve banking
A certain percentage of any deposit that is placed in the vault while the remainder is lent out/invested by the bank.
junk bonds
A colloquial term for a high-yield or non-investment grade bond. Junk bonds are fixed-income instruments so called because of their higher risk. However, they have speculative appeal because they offer much higher yields than safer bonds. Companies that issue junk bonds typically have less-than-stellar credit ratings, and investors demand these higher yields as compensation for the risk of investing in them. A junk bond issued from a company that manages to have its credit rating upgraded will generally have a substantial price appreciation.
bond rating
A grade given to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s and Fitch provide these evaluations of a bond issuer’s financial strength, or its the ability to pay a bond’s principal and interest in a timely fashion.
AAA and AA
Highest bond rating; high credit-quality investment grade.
AA and BBB
Medium credit-quality investment grade
BB, B, CCC, CC, C
Low credit-quality (non-investment grade), or “junk bonds.”
D
Bonds in default for non-payment of principal and/or interest
