Chapter 1: Why Study Money, Banking, and Financial Markets

Question 1

financial markets

Answer 1

markets in which funds are transferred from people who have an excess of available funds to people who have a shortage

Question 2

security

Answer 2

a claim on the issuer’s future income or assets

Question 3

bond

Answer 3

a debt security that promises to make periodic payments for a specified period of time

Question 4

interest rate

Answer 4

cost of borrowing or the price paid for the rental funds

Question 5

common stock (stock)

Answer 5

represents a share of ownership in a corporation

Question 6

financial intermediaries

Answer 6

institutions that borrow funds from people who have saved and in turn make loans to people who need funds

Question 7

banks

Answer 7

financial institutions that accept deposits and make loans

Question 8

financial crises

Answer 8

major disruptions in financial markets that are characterized by sharp declines in asset prices and the failure of many financial and nonfinancial firms