Unit 4 Flashcards
You decide to open a savings account, and notice a sign in your bank that indicates deposits are FDIC insured. What protection does that give you?
If the bank fails, your deposits are protected up to $100,000
An example of blue chip stock might be…
A large, well-known company traded on the NYSE
Since bonds are considered amount the safest investments, you would expect that they would…
Have low interest rates
What condition is necessary for a fiat money system to work?
The government must control the money supply
Why is representative money more useful than commodity money?
Representative money is portable, durable, divisible, and acceptable. It can also be exchanged for something else of value
To finance the building of a new police station, a local government is most likely to issue a…
Municipal bond
In June, Leslie wins a cash prize of $2,000. She plans to use this money to pay her tuition bill in September. Leslie puts this money in a savings account because her main priority is…
Liquidity, since she’ll need to use he money in a short term
You are a financial advisor whose client is concerned about losing his investment if a company goes out of business. You advise him to buy…
Preferred stock
What did the Federalists believe about banking?
They believed that a centralized banking system was necessary
Near money includes…
Deposits in savings account and money market mutual funds
Erin borrowed $18,000 to buy a car. Her loan will be paid off in 5 years. By the time that she pays off the loan, she will have made $20,327 in payments. Why did she have to pay $2,327 in payments. Why did she have to pay $2,327 more than the price of the car?
She had to pay unrest of $2,327 for the privilege of borrowing the principal of $18,000
All of the following are low-risk investments EXCEPT…
Junk bonds
Your friend Jorge has just inherited $1,000 and would like to invest the money in the stock market. You suggest that he…
Contact a brokerage firm, who will put him in touch with a stockbroker
What happens when you make a purchase using a credit card?
The credit card issuer pays the store
American leaders in the early United States wanted to establish a stable banking system in order to…
Promote international trade and economic growth
Which of the following is NOT an example of liquid asset
A certificate of deposit
In the 1900s, which characteristic of money did the Russian currency lack?
Acceptability
Savings bonds differ from most other bonds in that…
The buyer does not receive periodic interest in payments in exchange for a Lowe purchase price
You borrow $500 form your parents to start a bagel delivery service. Your acting as…
An entrepreneur
You’re a financial advisor whose client wants a stock that pays regular dividends, you advise home to buy…
Income stock
Which of the following is an example of representative money
An IOU note
Which lender is most likely to charge you the highest interest rate on your loan
Finance company
The practice of restoring only a portion of deposits on hand is called
Fractional reserve banking
You do not have to pay state taxes in ingest earned on
Treasury bills
Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs, money market funds…
Are not insured by the FDIC
Against your better judgement, you lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. You are taking a…
Credit risk
You hear in true news that The Dow has fallen to just below 8000 points. This means that…
The Dow is at relatively high levels compared to the early 1980s, but short of its all-time high
What are “greenbacks” ?
Commodity money used by the Union during the Civil War
When you pay for a new CD with a debit card, you authorize the transfer of money from your account to the music store’s account. In other words, a payment by debit card is the electronic form of payment by…
Check
All of the following are examples of financial intermediaries EXCEPT…
A stock certificate
A stock split is most likely to occur when…
The price of a stock becomes to high
How much will the company have paid the holder when it retires its debts
$500, plus the original investment of $2,000
Which of the following is an example of a barter system
Instead of paying rent you clean the house for the owner
What is the largest source of income for banks
Interest they receive from loans
How did the US government make American public have confidence in the nations currency in the 1870s
The government adopted the gold standard
An example of equity
A share of stock
How can you offset your risk
ask for a higher interest rate
What is a mortgage used to purchase
Real estate
How did Penny and John pay for goods in their transaction
Through bartering
The main advantage if diversification as an investment policy is that it
Reduce risk to investors
The most trades are made
On the OTC market
The Great Crash can be attributed to all of the following EXCEPT…
The small number of people buying stock on a margin
Which of the following is an example of money as a unit of account
Checking the price of a camera at several stores before buying it at the lowest point
Which of the following was NOT a cause of the savings and loan crisis of the 1980s
The gold reserve act
Karen wants to buy stock, but is worried about the current “bear market.” This means that
Many investors are selling their stocks in anticipation of lower profits
Which of the following is the main disadvantage of using shells as money instead of coins?
Uniformity
Which of the following is NOT an example of M1 money?
A mutual fund
How did high rates affect savings and loans (S&Ls) in the 1980s?
S&Ls lost money, because they had to pay high interest in current deposits, but received low returns form low-interest loans they had made in the 1970s
When you invest Ina mutual fund,
Your money is invested in a variety of stocks and bonds
Who would a person invest in junk bonds?
He does not know anything about investments
