Chapter 8 Flashcards Preview

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Flashcards in Chapter 8 Deck (18):
1

Interest Rate

Price borrowers pay in order to consume at the present

2

Direct Finance

When a borrower deals directly with a lender

3

Maturity

The date that a payment will be made to a lender

4

Face Value

Value Paid at Maturity

5

Zero Coupon Bond

A bond in which the seller pays no interest payments

6

Coupon Rate

interest rate quoted on a bond

7

Indirect Finance

borrowing and lending with a middleman

8

Usury Law

puts a price ceiling on interest in rates, causes shortages in loanable funds

9

indirect crowding out

an increase in gov spending is financed by borrowing, private spending is decreased due to high interest rates

10

direct crowding out

private markets spending less because their ability to spend is taxed away

11

Leveraged Buyout

where a firm borrows in order to purchase another firm, then immediately sells the firm

12

insolvent

when a firm owes more than it owns

13

illiquid

when a firm cant pay it's immediate obligations

14

absolute priority rule

creditors pay back lenders from by rank of who lent to them first. oldest bondholders first stockholders last

15

Community Reinvestment act

forced banks to loan to poor people who couldnt pay

16

nonconforming loans

loans made to risky borrowers

17

systemic risks

risks to ENTIRE financial system

18

economic growth

healthy increase in production of goods and services