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B&F Principle Unit 4
Banking and Finance Principles Unit 4
Term | Definition |
---|---|
Aggregate Measures | Tools used to estimate the size of the money supply |
Annual Percentage Rate | Nominal rate on which interest is calculated per year |
Annual Percentage Yield | Effective rate of interest when compounding is factored in |
Certificate of Deposit | Savings instrument with fixed interest rate and fixed maturity date |
Checking Account | An account which allows the holder to write checks against deposited funds |
Commodity Money | Currency based on some item of value, such as gold or precious stones |
Compound Interest | Return calculated by adding interest to principal for next interval |
Demand Deposit | Deposit payable on demand whenever the depositor chooses |
Discount Rate | Interest rate that the Fed charges for loans to member banks |
Excess Reserves | Those reserves held by a bank beyond its reserve requirement; used to create money |
Federal Funds Rate | Interest charged for short-term, interbank loans |
Fiat Money | Money deemed legal tender by the government but not based on or convertible by a commodity |
Fractional-Reserve System | Practice of reserving only part of a deposited quantity |
Interest | Price paid for the use of money |
Liquidity | The measure of how quickly things may be converted to something of value like cash |
Money Market Deposit Account | Savings account earning a competitive interest rate from invested deposits |
Money Supply | Liquid assets held by banks and individuals |
Multiplier Effect | Phenomenon that creates new deposits from lending |
Primary Reserves | Cash on hand, deposits due from banks, and the percentage required by the Federal Reserve System |
Prime Rate | Interest rate banks charge their best and most reliable customers |
Secondary Reserves | Reserves other than primary reserves ex: Federal securities |
Statement Savings Account | Provides a monthly or quarterly computerized statement detailing all account activity |
Time Deposit | Deposit held for or maturing at a specified time; savings accounts, CDs, and money market accounts |
Transaction Account | Account that allows transactions to occur at any time and in any number |
M1 | A category of the money supply that can be spent immediately; includes transaction accounts |
Basic | A type of checking account that offers few simple services for a minimal cost |
Maturity Date | The date on which a certificate of deposit is paid |
Principal | The beginning amount used to calculate interest |
Joint Account | Two or more owners, each of whom has equal and independent access to it |