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W!SE Chapters 1-4
Terms in this set (60)
Annual Percentage Rate
The yearly cost of a loan or revolving credit vehicle (such as a line of credit or credit card). The APR includes all interest, charges, and fees that apply to the loan or credit arrangement.
The quantity of goods and services you can buy with your money.
Interest that is added back to the principal amount of an investment or loan. The original principal plus the added interest amount becomes the new principal amount for the next compounding period.
Fed Funds Rate
The interest rate that the Federal Reserve charges commercial banks to borrow money from the Fed.
The independent federal agency that regulates banks and controls interest rates and the money supply.
The gradual increase in overall prices over time.
In the context of credit, Interest is the amount of money you will pay over the life of a loan as the price of borrowing the principal. In this sense, interest is also known as the "cost of capital". In the context of investment and savings, Interest is the amount of money you earn as a return on your savings or investment.
The amount of Interest that a bank or other lender charges as the cost of borrowing. The Interest Rate is usually expressed as a percentage of the loan amount.
The original sum of money that you borrow, in the case of a loan, or that you invest or save. In the case of consumer loans (car loans, mortgages, etc.), the principal usually equals the purchase price of the good or service.
Rule of 72
The formula used to calculate how long it will take for a sum of money that you have saved or invested to double at a given rate of interest.
Interest that is paid only on the original principal amount of a loan or investment. Simple interest can be calculated using the formula I = P x R x T.
Time Value of Money
The principle that the value of a dollar today is greater than the value of a dollar in the future.
The ease with which assets can be converted into cash
Insures savings in most credit unions
Insures deposits of up to $250,000
A bank account that earns interest
Money Market Account
A bank account that typically pays a high yield, but has limited accessibility
The number of time you can withdraw from your savings account each month
Certificate of Deposit
A savings instrument with a fixed maturity date and interest rate; purchased from a bank
A loan given to a business or government entity, with the hopes of receiving interest on the maturity date
To sign a check for deposit
Medium of Exchange
Money is accepted by everyone to facilitate transactions
Measure of Value
Money is used as a standard to determine the values of goods and services
Store of Value
Money can be saved and used at a later date
money based on the belief that it will not fail
Department of the Treasury
U.S Dept. with the goal of promoting a stable economy, economic and job opportunities, and managing financial resources
Manufactures circulating coin in the U.S
Bureau of Engraving
Manufactures U.S dollar bills
Internal Revenue Service
Debit cards, credit cards, gift cards, prepaid debit cards, checks, and money orders
An unexpected gain in income, such as gaining an inheritance
An economic downturn
A severe or extended negative downturn
Given as an incentive to employees
Vacation and sick days
When the prices of goods and services fall
Total income earned before any deductions are taken out
A plan for spending and saving
Short Term Goal
Your expenses now, or monthly expenses (ex. rent)
Your expenses annually (ex. vacation)
Long Term Goal
Your expenses for the future (ex. kids)
The total of your earnings (job + investments + spouse's income)
When income and expenses meet
When expenses exceed income
When income exceeds expenses
The amount of money you make after taxes are taken out; take home pay
Surplus in you budget after you have paid for all of your needs
Food, clothing, shelter
Things you would like to have but can live without
Expense that stays the same every billing period
Expense that changes from billing cycle to billing cycle
How likely is it that you are going to purchase something
The #1 thing you give up when making a choice
Not spending too much now
weighing the costs and benefits before making a choice
Pay Yourself First
Having money sent directly from your paycheck to your savings account
Enough money to live off of for 3-6 months
Amount you own (in stocks, a house, assets)