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FINC 409 - Fall 2014 Exam 1 - vocab
Terms in this set (124)
the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets.
encompasses the financial system, institutions or intermediaries, financial markets, business firms, individuals, and global interactions that contribute to an efficiently operation economy.
organizations or intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds in physical assets.
physical locations or electronic forums that facilitate the flow of funds among investors, businesses, and governments
involve the sale or marketing of securities, the analysis of securities, and the management of investment risk through portfolio diversification
involves financial planning, asset management, and fundraising decisions to enhance the value of businesses.
the study of how growth-driven, performance-focused, early-stage (from development through early rapid growth) firms raise financial capital and manage their operations and assets.
the study of how individuals prepare of financial emergencies, protect against premature death and the loss of property, and accumulate wealth over time.
How an individual or organization treats others legally, fairly, and honestly.
a complex mix of financial intermediaries, markets, instruments, policy makers, and regulations that interact to expedite the flow of financial capital from savings into investment.
where debt securities with maturities of one year or less are issued and traded.
where debt instruments or securities with maturities longer than one year and corporate stocks or equity securities are issued and traded.
where the initial offering or origination of debt and equity securities takes place
physical location or electronic forums where debt (bonds and mortgages) and equity securities are traded.
obligations to repay borrowed funds
Debt Securities Markets
are markets where money market securities, bonds (corporate, financial institution, and government), and mortgages are originated and traded.
are where debt securities with longer-term maturities are originated and traded.
are where loans to purchase real estate (buildings and houses) are originated and traded.
are ownership shared in corporations
Equity securities markets
are makers where ownership rights in corporations are initially sold and traded.
Derivative Securities Markets
are markets where financial contracts or instruments that derive their values from underlying debt and equity securities are originated and traded.
Foreign Exchange Market
(FOREX) are electronic markets in which banks and institutional traders buy and sell various currencies on behalf of businesses and other clients.
Surplus Economic Unit
generates more money than it brings in and must balance its money receipts.
Deficit economic unit
spends more money than it brings in and must balance its money receipts with money expenditures by obtaining money from surplus units.
involves the direct or indirect transfer of individual savings to business firms in exchange for their debt and stock securities
include the direct ownership of land, buildings or homes, equipment, inventories durable goods, and precious metals
are moey, debt instruments, equity securities, and other financial contracts that are backed by real assets and the earning abilities of issuers.
is anything generally accepted as a means of paying for goods and services and for paying off debts.
Medium of exchange
the basic form of manay
exchange of goods or services without using money
Store of Value
money held for some period of time before it is spent
the ease with which an asset can be exchanged for money or other assets
Standard of Value
prices and contracts for deferred payments are expressed in terms of the monetary unit
Individual Net Worth
Sum of an individual's money, real assets, and financial assets or claims against others less the individual's debt obligations
monetary standard based on two metals, usually silver and gold
coins that contain the same value in metal as their face value
coins with face values higher than the value of their metal content.
Representative full-bodied money
paper money that is backed by an amount of precious metal equal in value to the face amount of the paper money
legal tender proclaimed to be money by law
money backed by the creditworthiness of the issuer
Automatic Transfer Service (ATS) Accounts
used to make direct deposits to, and payments from, checkable deposit accounts.
Provide for the immediate direct transfer of deposit amount
Money Market Securities
debt instruments or securities with maturities of one year or less.
Short-term debt obligation issued by the US federal government to meet its short-term borrowing needs when imbalances exist between tax revenues and government expenditures
Negotiable Certificate of Deposit
(Negotiable CD) is a short-term debt debt instrument issued by depository institutions to individual or institutional depositors.
short-term unsecured promissory note issued by a high credit-quality corporation
is a promise of future payment issued by a firm and guaranteed by a bank
short-term debt security sold by a business firm or financial institution to another business or institution where the seller agrees to repurchase the security at a specified price and date
short-term loans, usually with maturities of one day to one week made between depository institutions
M1 Money Supply
consists of currency, travelers' checks, demands deposits, and other checkable deposits at depository institutions
M2 Money Supply
includes M1 plus highly liquid financial assets, including savings accounts, small time deposits, and retail money market mutual funds (MMMFs)
Money Market Mutual Funds
(MMMF) issue shares to customers and invest the proceeds in highly liquid, short-maturity, interest-bearing debt instruments called money market investments
Provide predetermined credit limits to consumers at the time the cards are issued.
Gross Domestic Product
(GDP) A measure of the output of goods and services in the economy
Velocity of Money
(VM) measures the rate of circulation of the money supply.
Current Exchange Rate
the value of one currency relative to another
a single currency that has replaced the individual currencies of some of the member countries of the European Union
a rise or increase in prices of goods and services that is not offset by increases in their quality
loan backed by a real property in the form of buildings and houses
debt security created by pooling together a group of mortgage loans whose periodic payments belong to the holders of the security
process by which individual savings are accumulated in depository institutions and, in turn, lent or invested.
institutions that accept deposits from individuals and then lend these pooled savings to business, individuals, and governments
contractual savings organizations
groups that collect premiums on insurance policies and employee/employer contributions from participants and provide retirement benefits and insurance against major financial losses
firms that accept and invest individual savings and also facilitate the sale and transfer of securities between investors
firms that provide loans directly to consumers and businesses as well as help borrowers obtain mortgage loans on real property
depository institutions that accept deposits, issue check-writing accounts, and make loans to businesses and individuals
non-commercial bank depository institutions that accumulate individual savings and lend primarily to other individuals; specifically, savings banks, savings and loans associations, credit unions
type of thrift institution that accepts the savings of individuals and lends pooled savings to other individuals, primarily in the form of mortgage loans
savings and loan association
type of thrift institution that accepts savings of individuals and lends pooled savings to other individuals, primarily in the form of mortgage loans, and also to businesses
type of thrift institution that acts as a cooperative nonprofit organization existing primarily to provide member depositors with consumer credit
institutions that provide financial protection to individuals and businesses for life, property, liability, and health uncertainties
plans that receive contributions from employees and/or their employers and invest the proceeds on behalf of the employees
open-end or closed-end securities firm that sells shares in their firms to businesses, individuals, and governments, then invests the pooled proceeds in corporate and government securities
open-end (can issue an unlimited number of their shares to their investors) investment company that uses the pooled proceeds to purchase corporate and government securities
investment banking firm
securities firm that sells or markets NEW securities (primary market) issued by businesses to individuals and institutions; investment bank
securities firm that assists individuals who want to buy (secondary market) securities or sell their owned securities
finance firm that provides loans directly to consumers and businesses or aids individuals in obtaining financing
mortgage banking firm
finance firm that helps individuals obtain mortgage loans by bringing together borrowers and institutional investors
securities firm that helps businesses sell their new debt and their equity securities in order to raise financial capital; investment banking firm
Glass-Steagall Act of 1933
legislation that provided for separation of commercial banking and investment banking activities in the US
Gramm-Leach-Bliley Act of 1999
legislation that repealed the separation of commercial banking and investment banking provided for in the Glass-Steagall Act
bank that engages in commercial banking and investment banking
network of commercial banks, savings and loans, savings banks, and credit unions
Dodd-Frank Wall Street Reform and Consumer Protection Act
2010 legislation that claims to promote financial stability of the US by improving accountability and transparency in the financial system
dual banking system
setup that allows commercial banks to obtain charters from federal government or state government
discarded system whereby a state only allows a bank to have one full-service office location
limited branch banking
system that allows additional banking offices only within a geographically-defined distance of a bank's main office
statewide branch banking
system that allows banks to operate offices throughout a state
one-bank holding company (OBHC)
firm that only owns and controls one bank
multi-bank holding company (MBHC)
firm that owns and controls more than one bank
(a loan that is) backed by collateral
(a loan that is) not backed by collateral and acting as a general claim against the assets of the borrower
interest rate charged by banks for short-term unsecured loans to a bank's highest-quality business customers
certificate of deposit (CD)
type of time deposit that pays a fixed rate, has a stated maturity date, but can also be sold at a discount
ease with which a bank can meet depositor withdrawals and pay off liabilities when they come due
assessment of a bank's ability to keep the value of its assets greater than its liabilities
likelihood that a bank will be unable to meet its depositor withdrawal demands and/or other liabilities when they are due
immediately available deposits; consist of vault cash and deposits held at other depository institutions and at Federal Reserve Banks
short-term securities held by banks that are not immediately available but that can be quickly converted into cash at little cost to the banks
likelihood that borrower will default on (not make) interest and principal payments; credit default risk
interest rate risk
risk associated with changing market interest rates on the value of underlying debt instruments
when banks operate in more than one country
Federal Reserve System (The Fed)
US central bank that sets monetary policy and regulates banking system
Federal National Mortgage Association (FNMA/Fannie Mae)
quasi-governmental agency created by Congress in 1938 that claims to support the financial markets by purchasing home mortgages from banks and thus freeing the proceeds that could be lent to other borrowers
Government National Mortgage Association (GNMA/Ginnie Mae)
government-owned corporation created by Congress in 1968 to issue its own debt securities to obtain funds that are invested in mortgages made to low-income to moderate-income home purchasers
Federal Home Loan Mortgage Corporation (FHLMC/Freddie Mac)
government-owned corporation created by Congress in 1970 supposedly to aid mortgage markets by purchasing and holding mortgage loans
government-established organization responsible for supervising and regulating banking system and for creating and regulating money supply
Fed's Board of Governors
seven-member board of the Federal Reserve that sets monetary policy
approach taken by The Fed to regulate growth of money supply, cost of money, and availability of money
decision by The Fed that stimulates or represses the level of prices or economic activity
decision by The Fed that contributes to the smooth, everyday functioning of the economy
all efforts by The Fed to meet credit needs of individuals and institutions, to clear checks, and to support depository institutions
fractional reserve system
banking system where The Fed requires banks to hold reserves equal to a specified percentage of their deposits
vault cash and deposits held at Reserve Banks
Fed-required minimum reserve dollar amounts that banks must hold
required reserves ratio
Fed-required minimum percentage of total deposits banks must hold as reserves
deposit amounts held by banks that exceed required reserves
Fed discount rate
interest rate that a bank must pay to borrow from its regional Reserve Bank
instrument of monetary policy to alter bank reserves; involve The Fed's buying and selling of securities in the "open market"
quantitative easing (QE)
non-traditional monetary policy designed to stimulate economic activity--by printing more money--when conventional monetary policy methods are ineffective
federal funds rate
rate on overnight loans from banks that have more than their required reserves to banks that have less than their required reserves
Consumer Credit Protection Act
legislation passed by Congress in 1968 that requires the clear explanation of consumer credit costs and garnishment procedures (taking wages or property by legal means) and prohibits overly high-priced credit transactions
control created by Fed task force that enacts the Truth in Lending section of the Consumer Credit Protection Act with the intent to make consumers aware of and able to compare costs of alternate forms of credit
European Central Bank (ECB)
multi-national institution that conducts monetary policy for European countries which use euro as their common currency
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