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ECONOMICS C11: FINANCIAL MARKETS

Terms

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What is Investment?
The act of redirecting resources from being consumed today so that they may create benefits in the future.
What is a Financial System?
Includes savers and borrowers and allows the transfer of money between them to take place.
What is a Financial Asset?
Claim on the property or income of a borrower.
What is a Financial Intermediary?
An Institution that helps channel funds from savers to borrowers.
What are Mutual Funds?
A fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets.
What is Diversification?
Spreading out your investments to reduce risk.
What are Portfolios?
A collection of financial assets.
What is a Prospectus?
An investment report to potential investors.
What is the Coupon Rate?
The interest rate that a bond issuer will pay to a bondholder.
What is Maturity?
The time at which payment to the bondholder is due.
What is Yield?
The annual rate of return on the bond if the bond were held to maturity.
What are Savings Bonds?
Low-denomination bond issued by the United States government. Ex. a $50 bond will cost $25 & earn $25 interest at maturity yielding $50 payout
What are Municipal Bonds (Munies)?
Bonds issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks, and schools.
What is a Corporate Bond?
A bond that a corporation issues to raise money to expand its business.
What is the Securities and Exchange Commission?
An independent agency of the government that regulates financial markets and investment companies.
What is a Junk Bond?
A lower-rated, potentially higher-paying bond with higher risk.
What is a Capital Market?
A market in which money is lent for periods longer than one year.
What is a Money Market?
A market in which money is lent for periods of less than a year.
What is a Primary Market?
A market for selling financial assets that can only be redeemed by the original holder.
What is a Secondary Market?
A market for reselling financial assets. More liquid for investors needs.
What is a Share?
Portion of stock
What are Equities?
Claims of ownership in a corporation.
What is Capital Gain?
The difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller.
What is Capital Loss?
An investor who sells stock at a price lower than the purchase price yielding a loss.
What is a Stock Split?
The division of a single share of stock into more than one share. Favorable to investors as the price of stock tends to rise after this happens.
What is a Brokerage Firm?
A business that specializes in trading stocks.
What is a Stock Exchange?
A market for buying and selling stock.
What is the OTC (Over the Counter) Market?
An electronic marketplace for stocks and bonds.
What is Nasdaq ( National Association of Securities Dealers Automated Quotations)
American market for OTC securities. Trading information broadcast to some 360,000 computer terminals worldwide.
What is a Put Option?
The option to sell shares of stock at a specified time in the future.
What is a Bull Market?
A steady rise in the stock market over a period of time.
What is a Bear Market?
A steady drop in the stock market over a period of time.
What is "The Dow"?
Index that shows how certain stocks have traded. Represent 30 large companies in various industries like food, entertainment & technology
What is the " S & P 500 "?
(Standard & Poor's 500) An Index that shows the price changes of 500 different stocks.
What was the Great Crash?
The collapse of the stock market in 1929. Black Tuesday (Oct. 29th 1929) a record 16.4 million shares sold compared with 4-8 million shares earlier in yr.
What is Speculation?
The practice of making high-risk investments with borrowed money in hopes of getting a return.

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