Studied by 0 peopleWhat are characteristics of money?
Divisible, Durable, Acceptable, Limited, Profitable, Uniform.
What are the functions of money?
Store value, medium of exchange,measure of account/value.
What is the difference between commodity money & representative money?
Commodity has some other value, representative can be traded for a fixed amount of commodity.
What are the functions of banks?
Place to store money, make loans, receive deposits.
How do we use money as a medium of exchange?
To purchase things
Main purpose of Savings Banks?
Neighborhood banks- accept deposit, make mortgages.
Importance of Commercial Banks?
Play the largest role in the economy of all financial institutions.
How does deregulation affect banks?
Many rules are lifted, more banks opened, less oversight, more products offered.
Identify High Risk Investment
Junk bonds, penny stocks
Give an example of Time Deposits
CD’s, corporate bonds, government bonds
What is a Mutual Fund
Assets that pools money from many people to buy a variety of stocks, bonds, etc.
Advantages of mutual find ownership
Less risky because assets are diversified
How is a Credit Union different from a bank?
To have an account at a Credit Union you must be a member of some group to join, usually offer better rates than regular banks.
What is the difference between a stock & a bond?
Stock is a certificate of ownership in a corporation
Bond is merely a loan made to the company
Investments that you own include
real estate, stock, Mutual funds, collectibles
Investments that are loans include
Savings accounts, checking accounts, bonds, MMDA’s
Differences between principle & interest
Principle is amount loaned/borrowed, interest is the amount charged for the privilege of borrowing
The relationship between risk-return
Higher return the higher the risk, lower return lower risk
Examples of safe investments with low reward
Savings account, checking account
What is fiat money
Money that the government says must be accepted for payments.
When investing you need to consider
Risk, liquidity, return
Example of a barter system
Someone mows your lawn and you make them dinner
What does Unit of Account/Unit of Measure mean?
Can compare values of various items
What does FDIC do?
Insures deposits in checking & savings accounts. Even if the bank fails-deposits up to $250,000 are safe.
Which of the following is a employer sponsored retirement plan that uses pre tax dollars, that is taxed on withdrawal
Traditional IRA
A stock split is most likely to occur when
the price of stock becomes too high
Which of the following is considered the riskiest investment?
stock market
A certificate of deposit is
Placing money in a bank for a fixed period of time
In regard to investments, an investment with a higher risk
usually has a bigger potential of a huge reward
Which of the following is NOT one of the three major considerations when making an investment?
How your investment affects GDP
Comparing the price and value of similar products and determining the best value is using money as
a unit of account/measure of value
What happens when you make a purchase using a credit card?
you are really taking out a loan with the issuer of the credit card
The main advantage of diversification as an investment policy is that it
reduces risk to investors
The more liquid an asset, the closer it is to
cash
The most stock trades are made
New York Stock Exchange
Which of the following is an example of money as a medium of exchange?
purchasing a toy for $8.99
Amanda deposits $1,000 in her savings account at Members’ Choice Credit Union. She is using money as (a)
store of value
The amount borrowed when a consumer gets a loan is called the
principal
In a regular savings or checking account, your money is now insured up to:
$250,000
Which of the following is a personal program that uses after tax dollars, but withdrawals are not taxed
Roth IRA
DIVIDENDS are shares of the profit that is distributed to
stock holders
Banks have money available to loan to consumers and businesses because
other consumers deposit money in the bank
What is a mortgage?
Loan for real estate (land, homes)
Identify several liquid assets/ What’s included in M1?
cash, coins, checkable deposits, travelers’ checks
What does “liquid” mean?
An assets is easily converted into cash
What is the biggest source of income for banks?
Interest they make on loans
How are US savings bonds different from Corporate bonds?
Corporate bonds are loans given to a company to finance projects or other businesses, they are in large amounts.
Government Bonds: Loans given to the US government to finance projects, very non risky investments, advantage - can buy smaller bond values.
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