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27 Cards in this Set
- Front
- Back
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financial intermediaries
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firms that extend credit to borrowers using funds raised from savers
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bond
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a legal promise to repay a debt, usually including both the principle amount and regular interest payments
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principle amount
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the amount origionally lent
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coupon rate
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the interest rate promised when a bond is issued
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coupon payments
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regular interest payments made to the bondholder
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stock (or equity)
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a claim to partial ownership of a firm
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dividend
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a regular payment received by stockholders for each share that they own
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risk premium
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the rate of return that financial investors require to hold risky assets minus the rate of returns on safe assets
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diversification
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the practice of spreading of ones wealth over a variety of different financial investments to reduce overall risk
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mutual fund
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a financial intermediary that sells share in itself to the public, then uses the funds to buy a wide variety of financial assets
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international capital flows
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purchases or sales of real and financial assets across international borders
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capital inflows
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purchases of domestic assets by foreign households and firms
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capital outflows
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purchases or foreign assets by domestic households and firms
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trade balance (or net export)
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the value of a countries exports less the value of its imports in a particular period (quarter or year)
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trade surplus
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when exports exceed imports, the difference between the value of a countries exports and the calue of its imports in a given period
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trade deficit
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when imports exceed exports, the difference between the value of a countries imports and the value of its exports in a given period
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factors affecting stock prices:
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1)an increase in expected future dividends
2)an increase in interest rates 3)an increase in perceived riskiness |
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Firms that extend credit to borrowers using funds raised from savers are known as __________.
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financial intermediaries
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A legal promise to repay a debt, usually including both the principle amount and regular interest payments, is known as a __________.
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bond
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The promised interest rate when a bond is issued, is known as the __________.
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coupon rate
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As the interest rate decreases, the price of bonds __________.
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increases
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As the rate of return on safe assets rises, the risk premium __________.
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falls
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The practice of spreading ones wealth over a variety of different financial investments to reduce overall risk, is known as __________.
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diversification
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When capital outflows rise, net capital outflow __________.
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increases
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If capital inflows are $20 billion and capital outflows are $8 billion, then net capital inflow equals $_____ billion.
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$12
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If domestic interest rates rise, net capital inflow __________.
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rises
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An increase in the riskiness of domestic assets __________.
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shifts the net capital inflow curve, KI, to the left
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