finance

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Finance

12th

46 Terms

1

role 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

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2

evolution of banks

goldsmiths were paid fees by depositors, then lend deposits as loans to earn interest

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3

4 historical pillars of the financial system

banks, trust companies, insurance companies, brokerage firms/ investment dealers

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4

banks

institution that deals in money and its substitues and provides financial services

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5

trust companies

businesses that manage people's money and property for them

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6

insurance companies

provide financial protection to life and physical property

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7

brokerage firms/ investment dealers

brought lenders and borrowers together through equity transactions

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8

bank of canada

owned by govt

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9

types of financial institutions

bank and credit union

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10

types of banking financial institutions

currency exchange, line of credit, mortgage, insurance, bank account, credit card, personal/business loan. investment/registered products

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11

CDIC

Canada Deposit Insurance Corporation

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12

debt

when you owe someone money

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13

debtor

A person who owes money

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14

credit

sum of money made available for borrower

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15

creditor

the lender

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16

good debt

education or appreciating value

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17

bad debt

rapidly depreciating assets purchased through loans

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18

types of debt/ creit

credit cards, consumer loans, line of credit, mortgage, business loan, installment buying

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19

principal

amount borrowed

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20

interest

cost of using someone elses money

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21

APR

Annual Percentage Rate

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22

term

how long you have to repay a loan

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23

fees

charges to use credit

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24

prime rate

best interest rate offered, starting point for negotiations (currently 6.7%)

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25

sources of credit

family and friends, financial institutions, mortgage and loan companies, retailers, yourself

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26

instalment credit

borrow a set amount, fixed payments and time period, fixed or variable interest, ex car loan or mortgage

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27

revolving credit

can borrow any amount up to a credit limit, req. min monthly payment, no fixed repayment period, ex credit card

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28

variable interest rate

reflects interest rate changes in the economy as time progresses and loan is repaid

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29

fixed interest rate

interest rate set for length of term

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30

what affects interest rates

length of term, payment history, secured vs unsecured, source of credit, downpayment

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31

secured debt

debt guaranteed by collateral

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32

unsecured debt

a loan that is not backed by pledged assets (collateral)

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33

considerations before securing loan

capital (collateral), character questions, capacity (ability to carry debt), credit rating

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34

credit score

lower the score the worse the credit

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35

credit report

A detailed report of an individual's credit history

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36

frequent vs infrequent compound periods

frequent compounding periods allows investment to grow faster

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37

traditional bank

customers can bank in person or remotely, offers a variety of financial services

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38

virtual bank

all banking transactions take place remotely

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39

chequing account

used for daily spending

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40

savings account

used to achieve short or long term saving goals by setting money aside and earning interest

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41

cash flow

money going in and out

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42

networth

assets- liabilities

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43

balance sheet

statement of assets, liabilities and capital of a business

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44

Smart goals

s-specific

m-measurable

a-attainable

r-realistic

t-timely

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45

liquid asset

asset that can easily be converted into liquid cash in a short period of time

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46

OSAP

Ontario Secondary Assistance Program

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