6.0 Assets, Markets, and Planning

Question 1

*anything of value or resource of value that can be converted into cash.

Answer 1

ASSETS

Question 2

*one of many varieties of systems, institutions, procedures, social relations, and infrastructures whereby parties engage in exchange.

Answer 2

MARKETS

Question 3

*a comprehensive evaluation of individual current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.

Answer 3

PLANNING

Question 4

*type of financial institution that accepts deposits, offers checking account services; makes business, personal and mortgage loans; and offers basic financial products like certificates of deposit (CDs) and savings accounts and other services.

Answer 4

COMMERCIAL BANKS

Question 5

*an institution that accepts savings at interest and lends money to savers chiefly for home mortgage loans and may offer checking accounts and other services

Answer 5

SAVINGS & LOANS

Question 6

*financial insitution owned by its members rather than shareholders. Members of credit union pool their deposits and provide loans and other financial services to each other.

Answer 6

CREDIT UNIONS

Question 7

*process of investing in multiple investments

Answer 7

VALUE OF DIVERSIFICATION

Question 8

*concept that money available at present time is worth more than identical sum in future due to its potential earning capacity.

Answer 8

TIME VALUE OF MONEY

Question 9

*investment that earns interest that is then added to principle balance and interest is paid on original principle plus accumulated interest. In other words, compound interest payments get larger over time.

Answer 9

COMPOUND GROWTH/ACCRUED INTEREST

Question 10

*relationship between amount of return gainers on investment and amount of risk undertaken in investment.

Answer 10

RISK & RETURN

Question 11

*simple way to determine how long investment will take to double given a fixed annual rate of return, investors obtain rough estimate of how many years it will take for initial investment to duplicate itself.

Answer 11

RULE OF 72

Question 12

*a way to save for retirement that gives you tax advantages. Contributions you make to traditional IRA may be fully/partially deductable, depending.

Answer 12

TRADITIONAL IRA

Question 13

*similar to traditional IRA, but contributions are not tax deductable. Earnings are never taxed, even after withdrawal.

Answer 13

ROTH IRA

Question 14

*tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, known as “qualified tuition plans” are sponsored by states, state agencies, or educational institutions and are authorized by section 529 of the international revenue code.

Answer 14

EDUCATIONAL SAVINGS (529) ACCOUNT

Question 15

*offers employees the ability to save for retirement through payroll deductions sometimes matched by employers.

Answer 15

401K & 403 B (FOR NONPROFIT EMPLOYERS)

Question 16

*4 SPENDING COMPONENTS

Answer 16

1) consumer
2) business
3) government
4) foreign

Question 17

• Depositor receives a booklet in which deposits, withdrawals, and interest are recorded.
• Average interest rate is lower at banks and savings and loans than at credit unions.
• Funds are easily accessible

Answer 17

Passbook Account

Question 18

• Basically the same as a passbook account, except depositor receives monthly statements instead of passbook
• Accounts are usually accessible through 24-hour automated teller machines (ATMs).
• Interest rates are the same as passbook account
• Funds are easily accessible

Answer 18

Statement Account

Question 19

• Combines benefits of checking and savings
• Depositor earns interest on any unused money in his/her account

Answer 19

Interest-earning checking account

Question 20

• Checkings/savings account
• Interest rate paid built on a complex structure that varies with size of balance and current level of market interest rates
• Can access your money from ATM, teller, or by writing up to 3 checks a month
• immediate access to money

Answer 20

Money-market Deposit Accounts

Question 21

• bank pays a fixed amount of interest for fixed amount of money during fixed amount of time.

Answer 21

Certificates of Deposit (CDs)

Question 22

(CD) with higher rates at various intervals, such as every 6 months.

Answer 22

Rising-rate CDs

Question 23

(CD) with earnings based on the stock market

Answer 23

Stock-indexed CDs

Question 24

(CD) with higher rates and long-term maturities, as high as 10-15 years. However, the bank may “call” the account after a stipulated period, such as one or two years, if interest rates drop.

Answer 24

Callable CDs

Question 25

(CD) combine higher interest with a hedge on future changes in the dollar compared to other currencies

Answer 25

Global CDs

Question 26

(CD) attempt to attract savers with gifts or special rates

Answer 26

Promotional CDs

Question 27

Requires financial institutions to disclose the following info on savings account plans they offer: - Fees on deposit accounts - The interest rate - Other terms and conditions - APY

Answer 27

The truth in Savings Act (Federal Reserve Regulation DD)

Question 28

An "IOU" certifying that you loaned money to a government or corporation and outlining the terms of repayment

Answer 28

Bonds

Question 29

(Bond) Sold by private companies to raise money - If company goes bankrupt, bondholders have first claim to the assets, before stockholders

Answer 29

Corporate

Question 30

(Bond) - Issued by any non-federal government - Interest paid comes from taxes or from revenues from special projects. Earned interest is exempt from federal income tax

Answer 30

Municipal

Question 31

(Bond) The safest investment you can make. Even if US government goes bankrupt, it is obligated to repay bonds

Answer 31

Federal Government

Question 32

Professionally managed portfolios made up of stocks, bonds, and other investments.

Answer 32

Mutual Funds

Question 33

(mutual fund) includes variety of stocks and bonds

Answer 33

Balanced Fund

Question 34

(mutual fund) - has corporate bonds of companies from around the world

Answer 34

Global Bond Fund

Question 35

(mutual fund) - has stocks from companies in many parts of the world

Answer 35

Global Stock Fund

Question 36

(mutual fund) - emphasizes companies that are expected to increase in value; also has higher risk

Answer 36

Growth Fund

Question 37

(mutual fund) features stock and bonds with high dividends and interest

Answer 37

Income Fund

Question 38

(mutual fund) - invests in stocks of companies in a signle industry (such as tech, health care, banking)

Answer 38

Industry Fund

Question 39

(mutual fund) features debt instruments of state and local governments

Answer 39

Municipal Bond Fund

Question 40

involves stocks of companies from one goegraphic region of the world (such as Asia or Latin America)

Answer 40

Regional Stock Fund

Question 41

Stock represents ownership of a corporation. Stockholders own a share of the company and are entitled to a share of the profits as well as a vote in how the company is run.

Answer 41

Stocks

Question 42

Profits from the sale of a capital asset....

Answer 42

Capital Gains

Question 43

(retirement plans) - allows a person to contribute up to $5000 of pre-tax earnings per year. Contributions can be made in installments or in a lump sum.

Answer 43

Individual Retirement Account (IRA)

Question 44

(retirement plans) While the 5000 annual contribution to this plan is not tax-deductable, the earnings on the account are tax-free after five years. The funds from the Roth IRA may be withdrawn after age 59, if the account owner is disabled, for educational expenses, or for the purchase of a first home.

Answer 44

Roth IRA

Question 45

(retirement plans) Allows person to contribute to savings plan from his or her pre-tax earnings, reducing the amount of tax that must be paid. Employer matches contributions up to a certain level.

Answer 45

401K

Question 46

(retirement plans) Allows self-employed person to set aside up to 15% of income (but not more than $35,000 per year)

Answer 46

Keogh Plan

Question 47

The act of providing a person with money or other things of economic value in exchange for their goods, labor, or to provide costs of injuries that they have inccurred.

Answer 47

Compensation

Question 48

Section of the financial market where highly liquid, short term debt securities is created, bought, and sold

Answer 48

Money Markets

Question 49

The part of financial system concerned with raising capital by dealing in shares, bonds, and long-term investments

Answer 49

Capital Markets

Question 50

Entity that acts as middleman between two parties in financial transaction such as commercial bank, investment bank, mutual fund, or pension fund

Answer 50

Intermediary

Question 51

A financial institution formed primarily to accept consumer deposits and make home mortgages

Answer 51

Thrift Institutions

Question 52

Bank organized to hold funds or individual depositors in interest-bearing accounts and to make long-term investments.

Answer 52

Savings Banks

Question 53

Financial institution typically owned and overseen by its customers or shareholders.

Answer 53

Savings and Loan Association

Question 54

Chartered by local or regional governments and do not offer capital stock, but rather the bank is owned by its members, and any profits are shared among its members.

Answer 54

Mutual Savings Banks

Question 55

A nonprofit institution that's owned by the people who use its financial products

Answer 55

Credit Unions

Question 56

An independent agency created by the congress to maintain stability and public confidence in the nation's financial system

Answer 56

FDIC

Question 57

An independent federal agnecy that insures deposits at federally insured credit unions, protects the members who own credit unions..

Answer 57

National Credit Union Agency (NCUA)

Question 58

~ A type of mutual fund that invests in high-quality, short-term debt instruments, cash, and cash equivalents.

Answer 58

MMMF (Money Market Mutual Funds

Question 59

~short-dated government security, yielding no interest but issued at a discount on its redemption price.

Answer 59

Treasury Bill

Question 60

~the amount due and owed to satisfy the payoff of an underlying obligation, sans interest or other charges.

Answer 60

Principal Balance

Question 61

~the interest associated with a bank account, loan, or investment increases exponentially--rather than linearly-- over time.

Answer 61

Compound Interest

Question 62

~a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment.

Answer 62

Annual Percentage Rate (APR)

Question 63

adding earnings to an initial investment that also earns money

Answer 63

compound