Class 2- Intro to Money and Banking

Question 1

Financial Intermediaries

Answer 1

-Banks and other financial institutions act as financial intermediaries
-Do this by transferring funds from those with surplus funds to those with shortages of funds
-By reducing the transaction costs of lending and borrowing, wealth is created

Question 2

Security

Answer 2

A claim on the issuer’s future incomes or assets

Question 3

Asset

Answer 3

Financial claim or piece of property that is subject to ownership

Question 4

Bond

Answer 4

Debt security that promises to make periodic payments for a specific period of time
-Includes coupon bonds, discount bonds, and perpetuities

Question 5

Interest Rate

Answer 5

Cost of borrowing or price paid for rental of funds
-Includes prime rate, discount rate, federal funds rate, etc.

Question 6

Stock

Answer 6

Share of ownership in a corporation

Question 7

Currency Markets

Answer 7

Markets where exchange of currency takes place, usually in major commercial banks in financial centers around the world

Question 8

Exchange Rate

Answer 8

The value of one currency in terms of another