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| moneyless economy that relies on trade |
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| any substance that serves as a medium of exchange, a measure of value, and store of value |
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| accepted by all parties as payment for goods and services |
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| common denominator that can be used to express worth in terms most people understand (price tag) |
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| property allows purchasing power to be saved until needed. (times passes and still valuable) |
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| money that has an alternative use as an electric good or commodity |
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| money by government decree |
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| money in form of coins made from silver or gold |
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| standard unit of currency |
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| 4 characteristics of money? |
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| divisible,durable,portable,limited supply |
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| Federal Reserve System (FED) |
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Definition
nations first true banking system
owned by government but publicly controlled |
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| bank that can lend to other banks in a time of need |
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| paper currency issued by the Fed that replaced all other types of federal currency |
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| rush by depositors to withdraw funds from bank before it failed |
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| banks that cater to the interest of buisness and commerce |
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| Demand Deposit Accounts (DDAs) |
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Definition
also known as checking account
accounts whos funds can be removed by writing a check without prior approval from the depository institution |
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| financial institution that accepted the deposits of small investors but didnt have DDAs until mid 1970s |
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| Mutual Savings Bank (MSB) |
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| depositor-owned financial organization operated only for benefits of depositors |
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| NOW accounts (Negoitable Order of Withdraw) |
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| type of checking account that pays interest |
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| Savings and Loans Association (S&L) |
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| depository institution that invests majority of funds in home mortgages |
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| nonprofit service cooperative that is owned by/operated for the benefit of its members. |
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| interest earning checking accounts |
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| What are three types of depository institutions? |
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| mutual savings bank, S&L, credit union, |
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| removal or relaxation of government restrictions on buisness |
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| person or institution to whom the money is owned |
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| network of savers, investors and financial institutions that work together to transfer savings to investors |
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| reciept showing investor made interest-bearing loan to bank or corporate bond |
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| claims on property and the income of the borrower |
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| financial intermendiaires |
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| finanical institutions that lend the funds that savers provide to borrowers (depository institutions, life insurance, pension funds) |
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| nonbank finanical institutions |
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| nondepository institutions that channel savings to borrowers. (life insurance, pension funds, finance companies, real estate investment trusts) |
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| firm that specializes in making loans directly to consumers and in buying installment contracts for merchants who sell goods on credit |
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| situation where outcome is not certain but probabilities can be estimated |
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| tax defferred investment and savings plan that acts as a personal pension fund for employees |
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| stated interest on the debt |
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| principal or total ammount intially borrowed that must be repaid to the lender at maturity |
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| What three main components must a bond have? |
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Definition
| coupon, maturity, par value. |
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| annual interest divided by purchase price. |
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| regular payment intended to provide income security to someone who has worked for a certain number of years or has been injured |
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| fund set up to collect income and disburse payments to people eligible for retirement or disability benefits |
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Term
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Definition
Total Mutual fund Value/# of Shares= Market Value
net value of the mutual fund divided by the number of shares issued by the mutual fund is the market value of a mutual fund share |
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| Certificates of Deposits (CDs) |
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Definition
most common forms of investments.
loans investors make to financial institutions
attracted by small investors |
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Definition
bonds issued by state and local governments
(finances highways, state buildings etc) |
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| low denomination, nontransferable bonds isssued by the US government through payroll savings plan |
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| Individual Retirement Accounts (IRAs) |
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| long term tax sheltered time deposits that an employee can set up as part of a retirement plan |
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| market where money is loaned for more than one year |
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| market where money is loaned for periods of less than a year |
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| market where only the original investor can repurchase or redeem a finanical asset |
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| market in which existing financial assets can be resold to new owners |
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| Efficent Market Hypothesis (EMH) |
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Definition
| principle that states it is not possible to beat the market regularly. instead of trying to use diversification or enlist in stockbroker |
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| lists 2800 stocks and has 1400 memberships to trade. Regional stock exchanges list stocks too small to be on NYSE |
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| places where buyers and sellers meet to trade securities |
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| over the counter market (OTC) |
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Definition
electronic marketplace for securities that are not traded on an organized exchange.
where the majority of US stocks are traded |
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| Standard & Poor's 500 (S&P 500) |
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| index made up of 500 representative stocks. |
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| Dow Jones Industrial Average (DJIA) |
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index made up of 30 stocks.
Most popular measure of stock market performance |
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| market in which transactions are made at a prevailing price |
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| market in which futures contracts are bought and sold |
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| agreements to sell at a specific date and time |
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| put and call options are bought and sold |
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| gives the owner the right to buy a stock at a specific price in the future |
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| gives the owener the right to sell a share of stock at a specified price in the future |
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