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41 Cards in this Set
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- Back
financial institution |
an intermediary that channels the savings of individuals, businesses, and governments, into loans or investments |
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commercial banks |
institutions that provide savers with a secure place to invest their funds and that offer loans to individual and business borrowers |
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investment banks |
institutions that assist companies in raising capital, advise firms on major transactions such as mergers or financial restructurings, and engage in trading and market making activites |
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Glass-Steagall Act |
an act of Congress in 1933 that created the federal deposit insurance program and separated the activities of commercial and investment banks |
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shadow banking system |
a group of institutions that engage in lending activities, much like traditional banks, but do not accept deposits and therefore are not subject to the same regulations as traditional banks. |
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financial markets |
forums in which suppliers of funds and demanders of funds can transact business directly |
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private placement |
the sale of a new security directly to an investor or group of investors |
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public offering |
the sale of either bands or stocks to the general public |
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primary market |
financial market in which securities are initially issued; the only market in which the issues is directly involved in the transaction |
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secondary market |
financial market in which preowned securities (those that are not new issues) are traded |
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money market |
a financial relationship created between suppliers and demanders of short-term funds |
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marketable securities |
short-term debt instruments, such as U.S. Treasury bills, commercial appear, and negotiable certificates of deposit issued by government, business, and financial institutions, respectively |
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Eurocurrency market |
international equivalent of the domestic money market |
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capital market |
a market that enables suppliers and demanders of long-term funds to make transactions |
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capital market |
a market that enables suppliers and demanders of long-term funds to make transactions |
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bond |
long-term debt instrument used by business and government to raise large sums of money, generally from a diverse group of lenders |
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preferred stock |
a special form of ownership having a fixed periodic dividend that must be paid prior to payment of any dividends to common stockholders |
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broker market |
the securities exchanges on which the two sides of a transaction, the buyer and seller, are brought together to trade securities |
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securities exchange |
organizations that provide the marketplace in which firms can raise funds through the sale of new securities an purchasers can resell securities |
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dealer market |
the market in which the buyer and seller are not brought together directly but instead have their orders executed by securities dealers that "make markets" in the given security |
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market makers |
securities dealers who "make markets" by offering to buy or sell certain securities at stated prices |
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Nasdaq market |
an all-electronic trading platform used to execute securities trades |
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over-the-counter (OTC) market |
market where smaller, unlisted securities are traded |
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bid price |
the highest price offered to purchase a security |
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ask price |
the lowest price at which a security is offered for sale |
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Euroband market |
the market in which corporations and governments typically issue bonds denominated in dollars and sell them to investors located outside the United States |
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foreign bond |
a bond that is issued by a foreign corporation or government and is denominated in the investor's home currency and sold in the investor's home market |
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international equity market |
a market that allows corporations to sell blocks of share to investors in a number of different countries simultaneously |
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efficient market |
a market that establishes correct prices for the securities that firms sell and allocates funds to their most productive uses |
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securitization |
the process of pooling mortgages or other types of loans and then selling claims or securities against that pool in the secondary market |
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mortgage-backed securities |
securities that represent claims on the cash floes generated by a pool of mortgages |
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Federal Deposit Insurance Corporation (FDIC) |
an agency created by the Glass-Stegall Act that provides insurance for deposits at banks and monitors banks to ensure their safety and soundness |
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Gramm-Leach-Bliley Act |
an act that allows business combinations (that is, mergers) between commercial banks, investment banks, and insurance companies and thus compete in markets that prior regulations prohibited them from entering |
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Securities Act of 1933 |
an act that regulates the sale of securities to the public via the primary market |
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Securities Act of 1934 |
an act that regulates the trading of securities such as stocks and bonds in the secondary market |
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Securities and Exchange Commission (SEC) |
the primary government agency responsible for enforcing federal securities laws |
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ordinary income |
income earned through the sale of a firm's goods or services |
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marginal tax rate |
the rate at which additional income is taxed |
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average tax rate |
a firm's taxes divided by its taxable income |
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double taxation |
situation that occurs when after-tax corporate earnings are distributed as cash dividends to stockholders, who then must pay personal taxes on the dividend amount |
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capital gain |
the amount by which the sale price of an asset exceeds the asset's purchase price |