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40 Cards in this Set

  • Front
  • Back
investment
the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
financial system
the system that allows the transfer of money between savers and borrowers
financial asset
claim on the property or income of a borrower
mutual fund
fund that pools the savings of many individuals and invests this money in a variey of stocks, bonds, and other financial assets
diversification
spreading out investments to reduce risk
portfolio
a collection of financial assets
prospectus
an investment report to potential investors
return
the money an investor receives above and beyond the sum of money initially invested.
credit rist
borrowers may not pay back the money they have borrowed, or they may be late in making payments
liquidity risk
you may not be able to convert the investment back into cash quickly enough for your needs
--cashing in a CD player and having to give up full value
inflation rate risk
inflation rates erode the vale of your assets
time risk
you may have to pass up better opportunites for investment
coupon rate
the interest rate that a bond issuer will pay to a bondholder
maturity
the time at which payment to a bondholder is due
par value/ face value/ pricipa
the amount that an investor pays to purchase a bond and that will be repaid to the invesor at maturity
yield
the annual rate of return on a bond if the bond were held to maturity
savings bond
low-denomination (50-10,000) bond issued by the United States Gov't. bought at half the value
Treasury Bonds, Bills, and Notes
U.S. Treasury dep. no longer used
"save and long-term"
municipal bonds
a bond ssued by a state or local gove't or municiaplity to finance "causes" (highways)
corporate bond
a bond that a coporation issues to raise money to expand its business.
securiteis and excahnge commission
an independent agency of the gov't that regulates financial markets and investment companies.
junk bond
lower rate
potentiall higher paying bond
Certifiates of deposit
by bank
low deposit
infinite maturity terms
Capital market
money is lent for 1year plus
money market
money is lent less than a year
primary market
only redeemed by the original holder
secondary
stocks can be resold
share
portion of stock
equities
claims of ownership in a corp.
OTC market
an electronic marketplace for stocks and bonds
Nasdaq
American market for OTC securites
futures
investor may buy/sell on a specific date at the price today.
options
investor may sell/ buys shares.
call option
buy shares at a specific time in the future
put option
sell shares at a specifc time in the future
bull market
steady rise in stock market
bear market
steady drop in stock market
the dow
index that shows how certain stocks have traded.. shows 30 large companies
S & P 500
index shows the price changes of 500 stocks
speculation
the practive of making high-risk investments with borrowed money in hopes of getting a big return