Personal Finance Test 2

Front 1

depository institution

Back 1

financial institution that accepts deposits (which are insured up to a maximum level) from individuals and provide loans

Front 2

commercial banks

Back 2

financial institutions that accept deposits and use the funds to provide commercial (business) and personal loans

Front 3

savings institutions

Back 3

financial institutions that accept deposits and provide mortgage and personal loans to individuals

Front 4

credit unions

Back 4

nonprofit depository institutions that serve members who have a common affiliation (such as the same employer or the same community)

Front 5

nondepository institutions

Back 5

financial institutions that do not offer federally insured deposit accounts, but provide various other financial services

Front 6

finance companies

Back 6

nondepository institutions that specialize in providing personal loans to individuals

Front 7

securities firms

Back 7

nondepository institutions that facilitate the purchase or sale of securities by firms or individuals by providing investment baking services and brokerage services

Front 8

insurance companies

Back 8

nondepository institutions that provide insurance to protect individuals or firms form possible adverse events

Front 9

investment companies

Back 9

nondepository institutions the sell shares to individuals and use the proceeds to invest in securities to create mutual funds

Front 10

financial conglomerates

Back 10

financial institutions that offer a diverse set of financial services to individuals or firms

Front 11

safety deposit box

Back 11

a box at a financial institution where a customer and store documents, jewelry, and other valuables

Front 12

automatic teller machine

Back 12

a machine where individuals can deposit and withdraw funds any time of the day

Front 13

cashier's checks

Back 13

a check that is written on behalf of a person to a specific payee and will be charged against a financial institution's account

Front 14

debit card

Back 14

a card that is used to make purchases that are charged against a checking account

Front 15

money order

Back 15

a check that is written on behalf of a person for a fixed amount that is paid in advance

Front 16

traveler's checks

Back 16

a check that is written on behalf of an individual and will be charged against a large well-known financial institution or credit card sponsor's account

Front 17

certificate of deposit

Back 17

an instrument that is issued by a depository institution and specifies a minimum investment, an interest rate, and a maturity date

Front 18

risk-free rate

Back 18

a return on an investment that is guaranteed for a specified period

Front 19

risk premium

Back 19

an additional return beyond the risk-free rate that can be earned from a deposit guaranteed by the government

Front 20

term structure of interest rates

Back 20

the relationship between the maturities of risk-free debt securities and the annualized yields offered on those securities

Front 21

money supply

Back 21

demand deposits (checking accounts) and currency held by the public

Front 22

monetary policy

Back 22

the actions taken by the Federal Reserve to control the money supply

Front 23

open market operations

Back 23

the Fed's buying and selling of Treasury securities

Front 24

money management

Back 24

a series of decisions made over a short-term period regarding cash inflows and outflows

Front 25

liquidity

Back 25

your ability to cover and cash deficiencies that you may experience

Front 26

overdraft protection

Back 26

a arrangement that protects a customer who writes a check for an amount the exceeds the checking account balance; it is a short-term loan from the depository institution where the checking account is maintained

Front 27

stop payment

Back 27

a financial institution's notice that it will not honor a check if someone tries to cash it; usually occurs in response to a request by the writer of the check

Front 28

NOW account

Back 28

a typ of deposit offered by depository institutions that provides checking services and pays interest

Front 29

retail CD's

Back 29

certificates of deposits that have small denominations (such as 5,000 or 10,000)

Front 30

money market deposit account

Back 30

a deposit offered by a depository institution that requires a minimum balance, has no maturity date, pays interest, and allows a limited number of checks to be written each month

Front 31

treasury securities

Back 31

debt securities issued by the US Treasury

Front 32

Treasury Bills (T-bills)

Back 32

treasury securities with maturities of one year or less

Front 33

secondary market

Back 33

a market where existing securities such as Treasury bills can be purchased and sold

Front 34

money market funds

Back 34

accounts that pool money from individuals and invest in securities that have a short-term maturity, such as one year or less

Front 35

commercial paper

Back 35

short-term debt securities issued by rage corporations that typically offer a slightly higher return than Treasury bills

Front 36

asset management account

Back 36

an account that combines deposit accounts with a brokerage and provides a single consolidated statement

Front 37

sweep account

Back 37

an asset management account that sweeps and unused balance in the brokerage account into a money market investment at the end of each business day

Front 38

credit risk

Back 38

the risk that a borrower may not repay on a timely basis

Front 39

interest rate risk

Back 39

the risk that the value of an investment could decline as a result of a change in interest rates

Front 40

liquidity risk

Back 40

the potential loss that could occur as a result of converting an investment into cash

Front 41

credit

Back 41

fund provided by a creditor to a borrower that will be repaid by the borrower in the future with interest

Front 42

non-installment credit

Back 42

credit provided for a short period, such as department store credit

Front 43

installment credit

Back 43

credit provided for specific purchases with interest charged on the amount borrowed

Front 44

revolving open-end credit

Back 44

credit provided up to a specified maximum amount based on income and credit history; interest is charged each month on the remaining balance

Front 45

credit reports

Back 45

reports provided by credit bureaus to document a person's credit payment history

Front 46

identity theft

Back 46

theft that occurs when an individual, without permission, uses your identifying information for his or her personal gain

Front 47

shoulder surfing

Back 47

tactic used when an identity their stands close to you in a place and reads the number of your credit cards as you conduct business

Front 48

dumpster diving

Back 48

tactic used when an identity thief goes through your trash for discarded items the reveal personal information that can be used for fraudulent purposes

Front 49

skimming

Back 49

tactic used when a store employee steals your credit card number by copying the information contained in the magnetic strip on the card

Front 50

pretexting

Back 50

tactic used when an identity their poses as an employee of a company with you conduct business, to solicit your personal information

Front 51

phising

Back 51

tactic used when pretexting happens online

Front 52

pharming

Back 52

similar to phishing, but targeted to larger audiences; tactic that directs users to boughs Web sites to collect their personal information

Front 53

retail credit card

Back 53

a credit card that s honored only by a specific retail establishment

Front 54

prestige card

Back 54

credit cards, such as gold or platinum cards, issued by a financial institution to individuals who have an exceptional credit standing

Front 55

financial charge

Back 55

the interest that you must pay as a result of using credit

Front 56

simple interest rate

Back 56

the percentage of credit that must be paid as interest on an annual basis

Front 57

annual percentage rate

Back 57

the simple interest rate including any fees charged by the creditor

Front 58

personal bankruptcy

Back 58

a plan proposed to the court in which you repay at least a portion of your debt and pay attorney and filing fees

Front 59

loan contract

Back 59

a contract that specifies the terms of a loan, as agreed to by the borrower and the lender

Front 60

amortize

Back 60

to repay the principal of a loan (the original of the loan payed out) through a series of equal payments. a loan repaid in this manner is said to be amortized

Front 61

maturity

Back 61

with respect to a loan, the life or duration of the loan

Front 62

collateral

Back 62

assets of a borrower that back a secured loan in the event that the borrower defaults

Front 63

secured loan

Back 63

a loan that is backed or secured by collateral

Front 64

unsecured loan

Back 64

a loan that is not backed by collateral

Front 65

annual percentage rate

Back 65

a rate that measures the finance expenses on a loan annually

Front 66

simple interest

Back 66

interest on a loan computed as a percentage of the existing loan amount (or principle)

Front 67

add-on interest method

Back 67

a method of determining the monthly payment on a loan; involves calculating interest that must be paid on the loan amount, adding together the interest and loan principal, and dividing by the number of payments

Front 68

tudent loan

Back 68

a loan provided to finances part of the expenses a student incurs while pursuing a degree

Front 69

home equity loan

Back 69

loan where the equity in a home serves as collateral for the loan

Front 70

equity of a home

Back 70

the market value of a home minus the debt owed on the home

Front 71

payday loan

Back 71

a short-term loan provided in advance of a paycheck

Front 72

points

Back 72

a fee charged by the lender when a mortgage loan in provided; stated as a percentage of the mortgage loan amount

Front 73

fixed-rate mortgage

Back 73

a mortgage in which a fixed interest rate is specified until maturity

Front 74

adjustable-rate mortgage

Back 74

a mortgage where the interest owed changes in response to movements in a specific market-determined interest rate

Front 75

caps

Back 75

maximum and minimum fluctuations in the interest rate on an adjustable-rate mortgage

Front 76

graduate payment mortgage

Back 76

a mortgage where the payments are low in the early years and then rise to a higher level over time

Front 77

balloon payment mortgage

Back 77

a mortgage where the monthly patients are relatively low, but one large payment is required after a specific period to play off the mortgage loan

Front 78

mortgage refinancing

Back 78

lying off an existing mortgage with a new mortgage that has a lower interest rate

Front 79

Depository institutions collect ___________ and issue _________

Back 79

deposits, loans