Studied by 0 peoplerole of the financial system
manage flow of money within economy linking savers and borrowers, helps economy grow (savers earn money on deposits), financial institutions give out loans
evolution of banks
goldsmiths were paid fees by depositors, then lend deposits as loans to earn interest
4 historical pillars of the financial system
banks, trust companies, insurance companies, brokerage firms/ investment dealers
banks
institution that deals in money and its substitues and provides financial services
trust companies
businesses that manage people's money and property for them
insurance companies
provide financial protection to life and physical property
brokerage firms/ investment dealers
brought lenders and borrowers together through equity transactions
bank of canada
owned by govt
types of financial institutions
bank and credit union
types of banking financial institutions
currency exchange, line of credit, mortgage, insurance, bank account, credit card, personal/business loan. investment/registered products
CDIC
Canada Deposit Insurance Corporation
debt
when you owe someone money
debtor
A person who owes money
credit
sum of money made available for borrower
creditor
the lender
good debt
education or appreciating value
bad debt
rapidly depreciating assets purchased through loans
types of debt/ creit
credit cards, consumer loans, line of credit, mortgage, business loan, installment buying
principal
amount borrowed
interest
cost of using someone elses money
APR
Annual Percentage Rate
term
how long you have to repay a loan
fees
charges to use credit
prime rate
best interest rate offered, starting point for negotiations (currently 6.7%)
sources of credit
family and friends, financial institutions, mortgage and loan companies, retailers, yourself
instalment credit
borrow a set amount, fixed payments and time period, fixed or variable interest, ex car loan or mortgage
revolving credit
can borrow any amount up to a credit limit, req. min monthly payment, no fixed repayment period, ex credit card
variable interest rate
reflects interest rate changes in the economy as time progresses and loan is repaid
fixed interest rate
interest rate set for length of term
what affects interest rates
length of term, payment history, secured vs unsecured, source of credit, downpayment
secured debt
debt guaranteed by collateral
unsecured debt
a loan that is not backed by pledged assets (collateral)
considerations before securing loan
capital (collateral), character questions, capacity (ability to carry debt), credit rating
credit score
lower the score the worse the credit
credit report
A detailed report of an individual's credit history
frequent vs infrequent compound periods
frequent compounding periods allows investment to grow faster
traditional bank
customers can bank in person or remotely, offers a variety of financial services
virtual bank
all banking transactions take place remotely
chequing account
used for daily spending
savings account
used to achieve short or long term saving goals by setting money aside and earning interest
cash flow
money going in and out
networth
assets- liabilities
balance sheet
statement of assets, liabilities and capital of a business
Smart goals
s-specific
m-measurable
a-attainable
r-realistic
t-timely
liquid asset
asset that can easily be converted into liquid cash in a short period of time
OSAP
Ontario Secondary Assistance Program
Note
Flashcard