Term
| What is the definition of Finance? |
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Definition
| the study of how individuals institutions, govts. and business acquire, spend and manage money and other financial assets. |
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Term
| What are the principles of finance? |
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Definition
1. Money has time value
2. higher returns are expected for higher risk
3. Financial markets are efficient in pricing securities
4. Managers and stock holders objectives may differ
5. Reputation Matters |
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Term
| What are the four main types of financial markets? |
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Definition
1. Debt securities market (Bonds markets, mortgage markets)
2. Equity Securities Market (Common stocks)
3. Derivative Securities Markets (Futures)
4. Foreign Exchange Markets |
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Term
| What are the three overlapping areas of finance? |
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Definition
1.Institutions/markets
2.investments
3.financial management |
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Term
| By how much did Enron overstate their net earnings? |
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Definition
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Term
| What is the maturity length in the Capital Markets? |
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Definition
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Term
| What are Derivative Securities Markets? |
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Definition
| Value from underlying debt or equity securities . |
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Term
| What are some examples of Derivative Securities Markets? |
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Definition
1.Forward Contracts
2.Futures Contracts
3.Options-puts and calls |
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Term
| What is a deficit economic unit/surplus economic unit? |
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Definition
| Deficit spends more money than it takes in while a surplus makes more than it spends. |
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Term
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Definition
| investor directly invest in a deficit economic unit |
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Term
| What is the indirect transfer method by which no new securities are formed? |
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Definition
| When investors use an investment bank to invest in an deficient economic unit |
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Term
| What is the indirect transfer method by which new securities are formed? |
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Definition
| investors uses a financial institution and gets a newly created security. Then the financial institution gives money to the deficit units which in turn give new securities to the financial institutions. |
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Term
| What all do Banks provide? |
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Definition
1.Create/Transfer Money
2.Process/Clear Checks
3.Provide financial Intermediation |
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Term
| When did the US go to Bimetalism? |
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Definition
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Term
| How was the dollar defined under Bimetalism? |
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Definition
| defined in grains of pure silver and grains in pure gold. |
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Term
| What was the problem with Bimetalism? |
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Definition
| Coins often didn't have the same value as what was printed on the face. |
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Term
| When did the US move to the Full Bodied Currency system? |
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Definition
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Term
| What is the Full Bodied Currency System? |
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Definition
| currency that is backed by the same value as what is on the face of it. |
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Term
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Definition
| Coins with face values higher than the value of their metal content. |
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Term
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Definition
| "Bad money drives out good money" |
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Term
| How much is a quarter from before 1965 worth today? |
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Definition
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Term
| What is Representative Full Bodied Money? |
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Definition
| Paper currency back by an amount of precious metal equal to the face value of the paper money. |
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Term
| How does Credit Money work? |
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Definition
| stores accept the card based on the credit worthiness of the card issuer and NOT you. |
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Term
| How does Deposit Money work? |
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Definition
| backed by the credit worthiness of the depository institution that issued the deposit. |
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Term
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Definition
| Short term debt obligation by the Gov. |
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Term
| What is a Negotiable Certificate of Deposit (CD)? |
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Definition
| Short term securities issued by depository institution |
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Term
| What is Commercial Paper? |
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Definition
| Short term unsecured promissory note issued by a high credit quality corporation |
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Term
| What is Bankers Acceptance? |
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Definition
| A promise of future payment issued by a firm and guaranteed by a bank. |
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Term
| What is a Repurchase Agreement? |
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Definition
| Short term debt security sold by a business of financial institution to another business where the seller agrees to repurchase the security at a specific price and date. |
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Term
| What are the types of money measured by the Fed? Types not measured? |
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Definition
1.M1, M2 and Money Market
2.Stocks, Bonds, Credit Cards |
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Term
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Definition
| Currency, travelers checks, demand deposits and other checkable deposits |
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Term
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Definition
| M1+highly liquid assets, savings accounts, small time deposits, retail money market mutual funds |
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Term
| What are Money Market Mutual Funds (MMMF)? |
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Definition
| Issues shares to customers and invest proceeds in highly liquid, short maturity, interest bearing debt instruments called money market investments. |
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Term
| What are the 2 equations for GDP? |
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Definition
MS X VM = GDP
(money supply x velocity of money)
RO X PL = GDP
(real output x price level) |
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Term
| What happens to GDP next year if we produce the exact same amount of goods/services as last year, but the prices double? |
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Definition
Nominal GDP would double
-Must use Real GDP calculation to see actual effect to GDP |
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Term
| If MS X VM = GDP and RO X PL = GDP then ....? |
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Definition
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Term
| What happens if RO and VM remain constant, but MS increases? What do Monetarist/Keynsians believe? |
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Definition
1.Inflation
2.Monetarist-beleive inflation happens
3.Keynsian-beleive MS has less direct effect on GDP.
Also, the believe ^MS = down I = ^ consumption = ^GDP |
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Term
| What did the Bretton Woods Agreement do? |
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Definition
| Value of each countries currency was fixed relative to gold reflecting 1949 world econ conditions. |
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Term
| What did the Smithsonian Agreement do? |
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Definition
| Devalued the dollar by 8% and increased the band by +-2.25% |
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