# Shared Flashcard Set

## Details

Money, Credit Finance Test #1
Chapter 1-4
27
Economics
10/02/2012

Term
 3 functions of money
Definition
 medium of exchange -recon by others store of value -holds value unit of account -price in dollars
Term
 who controls money supply in US
Definition
 the federal reserve
Term
 Money contributes to economic efficiency
Definition
 because without it we would be a bartar system In a barter system, if I want potatoes, and have oranges to trade, the person with the potatoes has to want oranges to be willing to trade with me. (I could be stuck with my oranges). With the use of money, I can give him a known amount of value in money, which he can buy what he wants to with.
Term
 terminology's of inflation and deflation
Definition
 hyperinflation- very rapid increases in price level inflation- increasing price level disinflation- slowdown in infl. rate 5% to 3% deflation- price decline real prices vs. nominal prices- real prices are adjusted to inflation ceteris paribus- other things being equal
Term
 Commodity Money
Definition
 -gold, copper, silver argicultural items  - control, supply of gold [image]
Term
 Fiat Money
Definition
 -paper -set by gov. reg -control; faith on god [image]
Term
 Bank Balance Sheet
Definition
 assets =liabilities + capital (equity) assets = cash vaults, reserve at fed, bond, loans, properties & buildings liab +stock holders= deposits and other bank borrowings, bank capital
Term
 Classify a deposits as a liability     Assets?
Definition
 Cd's      cash, loans, securites
Term
 Net worth, Capital
Definition
 -what you or your company is worth what you own - what you owe  (assets - liabilities)   captial- money
Term
 Fischer's Quantity Theory
Definition
 2. equation of exchange MV=PT  m =amount of money v= velocity or circulation of money P= price level T= amount of real trade transactions 3. variation of QT  %ΔM + %ΔV = %ΔP + %ΔQ M is amount of money, V is velocity or circulation of money, P is the price level, and T is the amount of real trade transactions (replaced with Q to give us P*Q = GDP).
Term
 Velocity of Money (turnover of money)
Definition
 GDP/M=V or PT/M=V   a ratio of nominal gdp to a measure of the money supply    turnover- the # of times one dollar is used to purchase final goods and services included in GDP
Term
 Primary and Secondary Market
Definition
 primary- investment banks underwriting fees on IPO - public offerings attracted by investment banks -stocks and bonds -corp raises funds through new issues of securites secondary- NYSE;NASDAQ; NY bond exchange -sale through investors -markets that trade financial instruments once they are issued
Term
 what kind of bond doesnt pay interest zero coupon bonds?
Definition
 zero coupon bond
Term
 Stock ownership represents ownership
Definition
 [image]
Term
 Simple Interest formula
Definition
 [image]
Term
 Fischers effect Nominal rate vs. real rate
Definition
 [image] [image]
Term
 calculate bond of 1000 6% yeild dollar coupon to you equals
Definition
 (interest rate/what you pay)*par value=current yield
Term
 most frequent analysis is yield to majority
Definition
 The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield[image] expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.
Term
 Inverse relationship bond prices of yeild
Definition
 Coupon / interest rate = Bond Price Positive and neg yield curve: Business Cycle and the Shape of Yield Curve  Stage 1 –recession: upsloping yield curve  Stage 2 –expansion: flat or inverting yield curve  Stage 3 –cycle peak: downsloping yield curve  Stage 4 –slowing economy: humped yield curve
Term
 future value of money is \$1 today is worth more than a dollar tom. unless you deflation
Definition
Term
 Loanable funds theory (Saunders)
Definition
 [image] [image]
Term
 Supply and demand graph
Definition
 [image]
Term
 fundamental analysis and technical analysis
Definition
 [image]
Term
 What is money?
Definition
 [image]
Term
 Who was the Gold standard locking prices down: -Bretton Woods fixed exchange rates to dollar with dollar being convertible into gold; ended 1968/1971 by Nixon;
Definition
Term
 What dividends are: periodic payments out of earnings
Definition
Term
 collateral debt
Definition
 An investment-grade security backed by a pool of bonds, loans and other assets[image]. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.
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