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Study sets matching "chapter 4 money banking"

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Study sets matching "chapter 4 money banking"

14 terms
Money and Banking Chapter 4
cash flows
present value
simple loan
fixed-payment loan (fully amortized lo…
streams of cash payments to the holder of debt instruments
based on the commonsense notion that a dollar paid to you a y…
the lender provides the borrower with an amount of funds (cal…
the lender provides the borrower with an amount of funds, whi…
cash flows
streams of cash payments to the holder of debt instruments
present value
based on the commonsense notion that a dollar paid to you a y…
15 terms
Money and Banking chapter 4
Investment portfolio choices
expected return
risk
determinants of portfolio choice
1.pg 88
the rate of return expected on an asset during a future period
the degree of uncertainty in the return on an asset
wealth expected return on asset risk liquidity information co…
Investment portfolio choices
1.pg 88
expected return
the rate of return expected on an asset during a future period
36 terms
Chapter 4 Money & Banking
An average investor must weigh the ben…
If there is an excess demand for bonds…
If the expected gains on the stocks ri…
In the bond market, the seller is cons…
the lower returns on liquid assets
the interest rate will fall
the equilibrium interest rate will rise
the borrower
An average investor must weigh the ben…
the lower returns on liquid assets
If there is an excess demand for bonds…
the interest rate will fall
18 terms
money and banking chapter 4
cash flows
present value
simple loan
fixed payment loan
cash payments to the holder of the security
today's value of a payment to be received in the future when…
a credit market instrument providing the borrower with an amo…
a credit market instrument that provides a borrower with an a…
cash flows
cash payments to the holder of the security
present value
today's value of a payment to be received in the future when…
16 terms
Money and Banking Chapter 4
Cash Flows
Present Value
Simple Loan
Fixed-Payment Loan
Cash payments to the holder of a security.
AKA Present Discounted Value... Today's value of a payment to be…
A credit market instrument that provides the borrower with an…
AKA Fully Amortized Loan... A credit market instrument that prov…
Cash Flows
Cash payments to the holder of a security.
Present Value
AKA Present Discounted Value... Today's value of a payment to be…
10 terms
Money and Banking Chapter 4
expected return
risk
diversification
systematic risk
the return expected on an asset during a future period
the degree of uncertainty in the return on an asset
dividing wealth among many different assets to reduce risk
the risk that is common to all assets of a certain type
expected return
the return expected on an asset during a future period
risk
the degree of uncertainty in the return on an asset
17 terms
Money and Banking - Chapter 4
Cash flows
Consol or Perpetuity
Coupon Bond
Coupon rate
Cash payments to the holder of a security
A perpetual bond with no maturity date and no repayment of pr…
A credit market instrument that pays the owner a fixed intere…
The dollar amount of the yearly coupon payment expressed as a…
Cash flows
Cash payments to the holder of a security
Consol or Perpetuity
A perpetual bond with no maturity date and no repayment of pr…
16 terms
money and banking chapter 4
present value
simple loan
fixed-payment loan
coupon bond
today's value of a payment to be received in the future when…
a credit market instrument providing the borrower with an amo…
a credit market instrument that provides a borrower with an a…
a credit market instrument that pays the owner a fixed intere…
present value
today's value of a payment to be received in the future when…
simple loan
a credit market instrument providing the borrower with an amo…
44 terms
Money and Banking Chapter 4
Yield to Maturity
Future Value Equation
Present Value
What makes the FV rise today?
The most accurate measure of interest rates... Commonly used as…
FV = PV (1 + i)^n
Based on the concept that $1 paid to you one year from now is…
The amount today is higher... The interest rate is higher... n is…
Yield to Maturity
The most accurate measure of interest rates... Commonly used as…
Future Value Equation
FV = PV (1 + i)^n
50 terms
Money and Banking Chapter 4
Determinants of Portfolio Choice
1) Wealth (determinant of portfolio ch…
Difference between Income and Wealth
2) Expected Rate of Return (Determinan…
1) wealth ... 2) expected rate of return ... 3) risk ... 4) liquidity…
we can assume that an increase in wealth will increase the qu…
Income is a person's earnings during a particular period, suc…
expected return = [(Prob of event 1 occurring) x (value of ev…
Determinants of Portfolio Choice
1) wealth ... 2) expected rate of return ... 3) risk ... 4) liquidity…
1) Wealth (determinant of portfolio ch…
we can assume that an increase in wealth will increase the qu…
14 terms
Money and banking chapter 4
yield to maturity
present value
simple loan
fixed payment loan
most accurate measure of interest rates. the interest rate th…
based on the concept of the fact that 1 dollar to you today i…
the lender provides the borrower with an amount of funds, whi…
lender provides borrower with an amount of funds, which must…
yield to maturity
most accurate measure of interest rates. the interest rate th…
present value
based on the concept of the fact that 1 dollar to you today i…
28 terms
Money and Banking Chapter 4
Cash Flows
Present Value
Simple Loan
Simple Loan PV Formula
The inflows and outflows of cash into and out of a business.
How much spending power money has today.
a credit market instrument providing the borrower with an amo…
PV = CF / ( 1+i )^n
Cash Flows
The inflows and outflows of cash into and out of a business.
Present Value
How much spending power money has today.
26 terms
Money & Banking Chapter 4
loanable funds theory
capital inflows
capital outflows
net capital inflows
real interest rates are determined by the supply and demand f…
funds provided to a country's investors by foreigners
funds provided to foreign investors by a country's savers
capital inflows minus capital outflows
loanable funds theory
real interest rates are determined by the supply and demand f…
capital inflows
funds provided to a country's investors by foreigners
32 terms
Money & Banking Chapter 4
Determinants of a Portfolio Choice
Wealth
Expected Rate of Return
Risk
1. Savers Wealth ... 2. Expected Rate of Return ... 3. Degree of Ri…
total value of assets a person owns minus liabilities
The rate of return expected on an asset during a future period
Degree of uncertainty in the return on an asset
Determinants of a Portfolio Choice
1. Savers Wealth ... 2. Expected Rate of Return ... 3. Degree of Ri…
Wealth
total value of assets a person owns minus liabilities
21 terms
Money & Banking Chapter 4
5 Portfolio determinates
Expected Return
Risk
Risk averse
1. Saver's wealth... 2. Required rate of return... 3. Degree of ris…
The return an asset should generate during a future period... (P…
The degree of uncertainty in the return on an asset
Choosing the asset with the lower risk when they have similar…
5 Portfolio determinates
1. Saver's wealth... 2. Required rate of return... 3. Degree of ris…
Expected Return
The return an asset should generate during a future period... (P…
33 terms
Money and Banking Chapter 4
Determinants of Asset Demand
An increase in wealth, expected return…
Risk Averse
Diversification
1. Wealth ... 2. Expected Returns ... 3. Liquidity ... 4. Risk ... 5. Inf…
increase demand
choose asset with lower risk when 2 assets have the same expe…
dividing wealth among different assets to reduce risk
Determinants of Asset Demand
1. Wealth ... 2. Expected Returns ... 3. Liquidity ... 4. Risk ... 5. Inf…
An increase in wealth, expected return…
increase demand
27 terms
Money and Banking Chapter 4
Loanable funds theory
Capital Inflows
Capital Outflows
Net Capital inflows
Real interest rates are determined by the supply and demand f…
Funds raised from foreign savers
Funds sent aboard
Capital inflows - Capital outflows
Loanable funds theory
Real interest rates are determined by the supply and demand f…
Capital Inflows
Funds raised from foreign savers
Chapter 4-Money and Banking
Cash flows
Present value
Simple loan
Four types of credit market instruments
streams of cash payments to the holder of a debt instrument
a dollar paid to you one year from now is less valuable than…
simplest debt instrument. lender provides borrower with an am…
1. simple loan 2. fixed-payment loan 3. coupon bond 4. discou…
Cash flows
streams of cash payments to the holder of a debt instrument
Present value
a dollar paid to you one year from now is less valuable than…
25 terms
Money & Banking Chapter 4
Yield to maturity
Present Value (or present discounted v…
What a bond earns (its rate of return)…
Coupon Bond
The most accurate measure of interest rates; ... the present val…
A dollar paid to you one year from now is less valuable than…
interest rate
pays the owner of the bond a fixed interest payment (coupon p…
Yield to maturity
The most accurate measure of interest rates; ... the present val…
Present Value (or present discounted v…
A dollar paid to you one year from now is less valuable than…
6 terms
money and banking chapter 4
monetary transmission mechanism
capital crunch
investment multiplier
fiscal policy
process through which monetary policy affects output
a fall in the capital that forces banks to reduce lending
effect of firms' earnings on investment, which magnifies fluc…
the government's choice of taxes and spending
monetary transmission mechanism
process through which monetary policy affects output
capital crunch
a fall in the capital that forces banks to reduce lending
8 terms
Money and Banking Chapter 4
present value
simple loan
4 Types of Credit Market Instruments
Fixed-payment loan
a dollar paid to you one year from now is less valuable than…
lender provides the borrower with amount of funds (the princi…
1. Simple Loan... 2. Fixed-Payment Loan... 3. Coupon Bond... 4. Discou…
the lender provides the borrower with an amount of funds that…
present value
a dollar paid to you one year from now is less valuable than…
simple loan
lender provides the borrower with amount of funds (the princi…
18 terms
Chapter 4 Money and Banking
present value
simple loan eq
4 types of credit market instrument
fixed payment loan
is based on a dollar paid to you one year from now is less va…
Present Value= Future Cash Flow/ (1+i)^n
1. simple loan 2. fixed payments 3. coupon bond 4. discount b…
the lender provides the borrower with an amount of funds whic…
present value
is based on a dollar paid to you one year from now is less va…
simple loan eq
Present Value= Future Cash Flow/ (1+i)^n
18 terms
Money and Banking Chapter 4
Expected return
risk
Diversifaction
desirable characteristics of a financi…
the rate of return expected on an asset during a future perio…
the degree of uncertainty in the return on an asset
the division of wealth among many different assets to reduce…
liquidity.. info easy
Expected return
the rate of return expected on an asset during a future perio…
risk
the degree of uncertainty in the return on an asset
15 terms
Money & Banking Chapter 4
Compound interest is the idea:... A) Tha…
Which of the following best expresses…
Suppose Paul borrows $4000 for one yea…
A saver knows that she will receive $1…
That you get interest on interest.
PV(1+i)^2
$4,280
5.26%
Compound interest is the idea:... A) Tha…
That you get interest on interest.
Which of the following best expresses…
PV(1+i)^2
15 terms
Money and Banking Chapter 4
Present Value
Yield to Maturity
Simple Loan
Fixed Payment Loan
a dollar paid to you one year from now is less valuable than…
the interest rate that equates the present value of cash flow…
lender provides borrower with funds that must be paid back by…
lender provides borrower with an amount of funds that the bor…
Present Value
a dollar paid to you one year from now is less valuable than…
Yield to Maturity
the interest rate that equates the present value of cash flow…
20 terms
chapter 4 money and banking
cash flows
present value (present discounted value)
simple loan
yield to maturity
streams of cash payments
a dollar paid to you one year from now is less valuable than…
lender provides borrower with an amount of funds (principal)…
interest rate that equates the present value of cash flow pay…
cash flows
streams of cash payments
present value (present discounted value)
a dollar paid to you one year from now is less valuable than…
20 terms
chapter 4 money and banking
cash flows
present value (present discounted value)
simple loan
yield to maturity
streams of cash payments
a dollar paid to you one year from now is less valuable than…
lender provides borrower with an amount of funds (principal)…
interest rate that equates the present value of cash flow pay…
cash flows
streams of cash payments
present value (present discounted value)
a dollar paid to you one year from now is less valuable than…
58 terms
Money and Banking Chapter 4
The expected an return on investment is:
Risk-loving
Risk-neutral
Most investors are risk averse
Expected return = [(Probability of event 1 occurring) X (Valu…
investors prefer to hold risky assets with the possibility of…
investors make decisions on the basis of expected returns, ig…
choose the asset with the lower risk when two assets have the…
The expected an return on investment is:
Expected return = [(Probability of event 1 occurring) X (Valu…
Risk-loving
investors prefer to hold risky assets with the possibility of…
78 terms
Money and Banking Chapter 4
A credit market instrument that pays t…
Each Federal Reserve bank has nine dir…
For simple loans, the simple interest…
The price of a consol equals the coupo…
coupon bond.
six; three
equal to
divided by the interest rate
A credit market instrument that pays t…
coupon bond.
Each Federal Reserve bank has nine dir…
six; three
22 terms
Money and banking chapter 4
Cash flow
Present value
Simple loan
Simple interest rate
Diferrent streams of cash payments to the holder with very di…
Commonsense notion that a dollar paid to you one year from no…
Simplest kind of debt instrument that the lender provides the…
Interest payment divided by the amount of the loan is a natur…
Cash flow
Diferrent streams of cash payments to the holder with very di…
Present value
Commonsense notion that a dollar paid to you one year from no…
22 terms
Money and Banking chapter 4
Determinants of portfolio choice (asse…
Wealth
Expected return
The expected return on an investment is:
The saver's wealth ... 2. The expected rates of return from dif…
An increase in wealth generally increases the quantity demand…
is the return expected on an asset during a future period.
Expected return = [(Probability of event 1 occurring) X (Valu…
Determinants of portfolio choice (asse…
The saver's wealth ... 2. The expected rates of return from dif…
Wealth
An increase in wealth generally increases the quantity demand…
84 terms
Chapter 4 Money and Banking
Investors value liquidity in an asset…
A portfolio is a... A) brokerage house sp…
3) Economists believe that as a saver'…
4) As wealth decreases, which of the f…
B) liquid assets incur lower selling costs.
D) collection of assets.
C) increase the fraction of wealth held as common stock.
C) cash
Investors value liquidity in an asset…
B) liquid assets incur lower selling costs.
A portfolio is a... A) brokerage house sp…
D) collection of assets.
25 terms
Money and Banking Chapter 4
Loanable Funds Theory
Domestic Savings (Net capital)
Capital Inflows
Capital Outflows
Real Interest Rates are determined by the supply and demand f…
Capital Inflows-capital outflows
funds provided to a country investors by foreigners (US sells…
funds provided to foreign investors by a countries savers (US…
Loanable Funds Theory
Real Interest Rates are determined by the supply and demand f…
Domestic Savings (Net capital)
Capital Inflows-capital outflows
17 terms
Money and Banking Chapter 4
First Bank of the United States ( year…
What was the First Bank of Us capital ?
How much did U.S. gov own in stock in…
By 1811 how much stock was owned by fo…
1791-1811
10 million dollars
2 million dollars loaned to them by the bank
70% of stock
First Bank of the United States ( year…
1791-1811
What was the First Bank of Us capital ?
10 million dollars
16 terms
Money, Banking, and the Financial System Chapter 4
Expected return
Risk
Diversification
Market Risk
The rate of return expected of an asset during a future period
the degree of uncertainty in the return of an asset
The division of wealth among assets to reduce risk
Risk that is common to all assets of a certain type, such as…
Expected return
The rate of return expected of an asset during a future period
Risk
the degree of uncertainty in the return of an asset
16 terms
Money and Banking Chapter 4 Vocab
basis point
bond
compound interest
coupon bond
one one-hundredth of a percentage point
a financial instrument that promises a series of future payme…
the interest you get on interest as it accumulates over time
a bond offering annual coupon payments at regular intervals u…
basis point
one one-hundredth of a percentage point
bond
a financial instrument that promises a series of future payme…
19 terms
EBHSHaedge Chapter 4 Banking: Managing Your Money
Blank Endorsement
Payee
Cleared Check
Check Register
a signature on the back of a check
the person to whom a check is written
checks which the bank has paid and returned in your statement
a record of account deposits, withdraws, checks, fees and int…
Blank Endorsement
a signature on the back of a check
Payee
the person to whom a check is written
Chapter 4 and 5 - Money and Banking
principal
neoclassical theory
perpetuity
coupon bond
amount of credit extended when one makes loan or purchases a…
marginal rate of substitution between present and future cons…
financial security that never matures, it pays interest forev…
pays a regular interest payment until maturity when face valu…
principal
amount of credit extended when one makes loan or purchases a…
neoclassical theory
marginal rate of substitution between present and future cons…
16 terms
Money, Banking, and Financial Markets - Chapter 4
Present Value
Principal
Compounding
Discount Factor
The amount of money you need to invest today to yield a given…
The amount of money invested in a financial security or depos…
Earning interest that was earned in prior years
The amount by which a future value is divided to obtain its p…
Present Value
The amount of money you need to invest today to yield a given…
Principal
The amount of money invested in a financial security or depos…
16 terms
Money & Banking Chapter 4.3
The ________ interest rate is adjusted…
The ________ interest rate more accura…
The nominal interest rate minus the ex…
When the ________ interest rate is low…
Answer: A
Answer: B
Answer: A
Answer: C
The ________ interest rate is adjusted…
Answer: A
The ________ interest rate more accura…
Answer: B
35 terms
Money & Banking Chapter 4 Lecture
Interest
FV formula
FV rises if:
PV formula
provides compensation for delaying the use of funds; relates…
FV = PV * (1+i)^n
PV increase, i increase, n increase
PV = FV / (1+i)^n
Interest
provides compensation for delaying the use of funds; relates…
FV formula
FV = PV * (1+i)^n
17 terms
Money & Banking Chapter 4.2
The ________ is defined as the payment…
Which of the following are true concer…
The sum of the current yield and the r…
What is the return on a 5 percent coup…
Answer: C
Answer: A
Answer: A
Answer: D
The ________ is defined as the payment…
Answer: C
Which of the following are true concer…
Answer: A
53 terms
Money & Banking Chapter 4.1
The concept of ________ is based on th…
The present value of an expected futur…
An increase in the time to the promise…
With an interest rate of 6 percent, th…
Answer: A
Answer: A
Answer: A
Answer: C
The concept of ________ is based on th…
Answer: A
The present value of an expected futur…
Answer: A
25 terms
Chapter 4 money terms: banking and financial systems
aggregates
barter
coincidence of wants
commodity
the different measures that are complied from a collection of…
the exchange of one good and service for another good or serv…
occurs when two people want what each other has to offer
anything that is useful or has value
aggregates
the different measures that are complied from a collection of…
barter
the exchange of one good and service for another good or serv…
18 terms
money in review- chapter 4- banking and finance
cost of borrowing momey on an annual b…
a decrease or loss in value
a detailed report of an individual's c…
time frame that a loan agreement is in…
annual percentage rate
depreciation
credit report
loan term
cost of borrowing momey on an annual b…
annual percentage rate
a decrease or loss in value
depreciation
15 terms
Money and Banking - Test 1 Multiple Choice - Chapter 4
Which of the following is NOT a major…
Which of the following is not an activ…
The _______ is made up of seven indivi…
Which of the following is currently a…
securities exchange commission
acting as an intermediary to match up lenders and borrowers i…
Board of Governors
regulating commercial baks and controlling monetary policy
Which of the following is NOT a major…
securities exchange commission
Which of the following is not an activ…
acting as an intermediary to match up lenders and borrowers i…
12 terms
Money and banking test 1 chapter 4
Consider a one-year discount bond that…
Consider a one-year bond that pays $1,…
A debt security that pays interest for…
Suppose you take out a car loan of $10…
$934.58
$1,442.31
a perpetuity
$313.36
Consider a one-year discount bond that…
$934.58
Consider a one-year bond that pays $1,…
$1,442.31
19 terms
AECO 350 - Money & Banking - Chapter 4 Vocab
Cash Flows
Consol or Perpetuity
Coupon Bond
Coupon Rate
Cash payments to the holder of a security.
A perpetual bond with no maturity date and no repayment of pr…
A credit market instrument that pays the owner a fixed intere…
The dollar amount of the yearly coupon payment expressed as a…
Cash Flows
Cash payments to the holder of a security.
Consol or Perpetuity
A perpetual bond with no maturity date and no repayment of pr…
17 terms
Chapter 4: Banking-Managing Your Money
Checking Account
Liquid
Service Charge
Check Register
A type of bank account that allows you to write a check, with…
An investment that can be bought, sold, or converted to cash…
A fee you pay the bank for having an account
An account of all transactions through a checking account
Checking Account
A type of bank account that allows you to write a check, with…
Liquid
An investment that can be bought, sold, or converted to cash…
26 terms
Economics 4200 Money & Banking: Chapter 4
Present Value (PV)
PV =
CF =
i =
A dollar paid to you one year from now is less valuable than…
Today's (present) value
Future cash flow (payment)
The interest rate
Present Value (PV)
A dollar paid to you one year from now is less valuable than…
PV =
Today's (present) value
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