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27 Cards in this Set

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