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Chapter 11 - Financial Markets
Prentice Hall - Economics: Principles in Action; Chapter 11 - Financial Markets; Section 1 - Saving and Investing; Section 2 - Bonds and Other Financial Assets; Section 3 - The Stock Market;
47
Economics
12th Grade
05/09/2012

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Term
investment
Definition
the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
Term
financial system
Definition
the system that allows the transfer of money between savers and borrowers
Term
financial asset
Definition
claim on the property or income of a borrower
Term
financial intermediary
Definition
institution that helps channel funds from savers to borrowers
Term
mutual fund
Definition
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds and other financial assets
Term
diversification
Definition
spreading out investments to reduce risk
Term
portfolio
Definition
a collection of financial assets
Term
prospectus
Definition
an investment report to potential investors
Term
return
Definition
the money an investor receives above and beyond the sum of money initially invested
Term
credit risk
Definition
borrowers may not pay back the money they have borrowed, or they may be late in making payments
Term
liquidity risk
Definition
you may not be able to convert the investment back into cash quickly enough for your needs
Term
inflation rate risk
Definition
inflation rates erode the value of your assets
Term
time risk
Definition
you may have to pass up better opportunities for investment
Term
coupon rate
Definition
the interest rate that a bond issuer will pay to a bond holder
Term
maturity
Definition
the time at which payment to the bondholder is due
Term
par value
Definition
the amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity
Term
yield
Definition
the annual rate of return on a bond if the bond were held to maturity
Term
municipal bond
Definition
a bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks and schools
Term
corporate bond
Definition
a bond that a corporation issues to raise money and expand its business
Term
Securities and Exchange Commission (SEC)
Definition
an independent agency of the government that regulates financial markets and investment companies
Term
junk bond
Definition
a lower-rated, potentially higher-paying bond
Term
capital market
Definition
market in which money is lent for periods longer than a year
Term
money market
Definition
market in which money is lent for periods of less than a year
Term
primary market
Definition
market for selling financial assets that can only be redeemed by the original holder
Term
secondary market
Definition
market for reselling financial assets
Term
share
Definition
portion of stock
Term
equities
Definition
claims of ownership in a company, such as stock
Term
capital gain
Definition
the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller
Term
capital loss
Definition
the difference between a lower selling price and a higher purchase price, resulting in a financial loss to the seller
Term
stock split
Definition
the division of a single share of stock into more than one share
Term
stockbroker
Definition
a person who links buyers and sellers of stock
Term
brokerage firm
Definition
a business that specializes in trading stocks
Term
stock exchange
Definition
a market for buying and selling stock
Term
Over-The-Counter (OTC) Market
Definition
an electronic marketplace for stocks and bonds
Term
Nasdaq
Definition
American market for OTC securities
Term
futures
Definition
contracts to buy or sell at a specific date in the future at a price specified today
Term
options
Definition
contracts that give investors the choice to buy or sell stock and other financial assets
Term
call option
Definition
the option to buy shares of stock at a specified time in the future
Term
put option
Definition
the option to sell shares of stock at a specified time in the future
Term
bull market
Definition
a steady rise in the stock market over a period of time
Term
bear market
Definition
a steady drop in the stock market over a period of time
Term
The Dow
Definition
index that shows how certain stocks have traded
Term
Standard and Poor's (S&P) 500
Definition
index that shows the price changes of 500 different stocks
Term
Great Crash
Definition
the collapse of the stock market in 1929
Term
speculation
Definition
the practice of making high-risk investments with borrowed money in hopes of getting a big return
Term
Black Tuesday - October 29, 1929
Definition
record 16.4 million shares of stock were sold, marking the true beginning of the Great Crash
Term
September 3, 1929
Definition
the Dow reaches an all-time high of 381
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