Financial Markets

Question 1

Investment

Answer 1

The act of redirecting resources from being consumed today so that they create benefits in the future; the use of assests to earn income or profit

Question 2

Financial System

Answer 2

The system that allows the transfer of money between savers and borrowers

Question 3

Financial Asset

Answer 3

Claim on the property or income of a borrower

Question 4

Financial Intermediary

Answer 4

Institution that helps channel funds from savers to borrowers

Question 5

Mutual Fund

Answer 5

Fund of savings that pools the savings of many individuals and invests this money in a variety of stocks, bonds and other financial assets

Question 6

Finance Companies

Answer 6

Make loans to consumers and small businesses

Question 7

Life Insurance

Answer 7

Provides financial protection for the family and other beneficiaries of the insured.

Question 8

Pension Funds

Answer 8

Income that a retiree recieves after working a certain number of years or reaching a certain age

Question 9

Diversification (and its importance)

Answer 9

The spreading out of of investments to reduce risk. dont put all your eggs in one basket

Question 10

Portfolio

Answer 10

Collection of financial assets

Question 11

Return

Answer 11

The money an investor recieves above and beyond the sum of money they initially invested

Question 12

Prospectus

Answer 12

Investment report to potential investors

Question 13

How do lenders offset risky loans?

Answer 13

By charging higher interest rates

Question 14

Coupon Rate

Answer 14

The interest rate that a bond issuer will pay to a bondholder

Question 15

Maturity

Answer 15

The time at which payment to a bondholder is due

Question 16

Advantage of a municipal bond

Answer 16

Tax free

Question 17

Par Value

Answer 17

The amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity

Question 18

Yield

Answer 18

The annual rate of return on a bond if the bond were held to maturity

Question 19

Savings bond

Answer 19

Low denomination bond issued by the US government

Question 20

Corporate Bond

Answer 20

Bond that a corporation issues to raise money to expand its business

Question 21

Junk Bonds

Answer 21

High risk bond that gained popularity in the 1980s and 1990s

Question 22

Securities and Exchange Commision

Answer 22

Independent agency of the gov that regulates the financial markets nad investment companies

Question 23

Bear Market

Answer 23

Steady drop in the market over a period of time

Question 24

Bull Market

Answer 24

Steady rise in the market over a period of time

Question 25

Municipal Bond

Answer 25

Bond issued by a state or local government or municipality to finance such improvements as highways, schools, etc.

Question 26

Share

Answer 26

Portion of a stock

Question 27

Capital Gain

Answer 27

The difference between the low price you pay for a stock and the high price you sell it for.

Question 28

Capital Loss

Answer 28

The difference between the high price you pay for a stock and the low price you sell it for.

Question 29

Stock Split

Answer 29

The division of a single share of stock into more than one share

Question 30

Stockbroker

Answer 30

Person who links buyers and sellers of stock

Question 31

Brokerage Firm

Answer 31

Business that specializes in trading stocks

Question 32

Stock Exchange

Answer 32

A market for buying and selling stock

Question 33

NASDAQ

Answer 33

Market that specializes in American high-tech and energy stocks

Question 34

OTC Market

Answer 34

Electronic marketplace for stock that is not listed or traded on an organized exchange

Question 35

Dow Jones Industrial Average (The Dow)

Answer 35

Index that shows how certain stocks have traded

Question 36

Standard and Poor's 500 (S & P 500)

Answer 36

Index that shows the price changes of 500 different stocks

Question 37

Great Crash

Answer 37

The collapse of the stock market in 1929

Question 38

Treasury Bill

Answer 38

Government bond that is repaid within 3 months to 1 year

Question 39

Treasury Note

Answer 39

Government bond that is repaid within 2 to 10 years

Question 40

Treasury Bond

Answer 40

Government bond that can be issued for as long as 30 years

Question 41

US Savings Bond

Answer 41

Low-denomination bond issued by the United States government