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Chapter 19
Personal Financial Literacy
| Term | Definition |
|---|---|
| financial institution | group that channels saving to in investors; includes banks, insurance companies, savings and loan associations, credit unions |
| savings | the dollars that become available for investors to use when others save |
| interest | payment made for the use of borrowed money |
| interest rate | the price of credit to a borrower |
| Federal Reserve System (FED) | privately owned, publicly controlled, central bank of the United States |
| Federal Deposit Insurance Corporation (FDIC) | the US government institution that provides deposit insurance on the depositor's account |
| credit union | non profit service cooperative that accepts deposits, makes loans, and provides other financial services |
| risk | a risk situation in which the outcome is not certain, but the probabilities can be estimated |
| Demand Deposit Accounts (DDAs) | account whose funds can be removed from a bank or other financial institution by writing a check or using a debit card |
| creditors | persons or institutions to whom money is owed |
| collateral | something of value that a borrower lets the lender claim if a loan is not repaid |
| secured | loan that is backed up by collateral |
| unsecured | loan guaranteed only by a promise to repair it |
| capital formation | the transfer of money from households to businesses and government through investments and loans |
| sole proprietorship | unincorporated business owed and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States |
| unlimited liability | requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships, general partnerships. |
| limited life | situation in which a firm legally ceases to exist when an owner dies, quits, or a new owner is added; applies to sole proprietorships and partnerships |
| partnership | unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm |
| limited partnership | form of partnership where one or more partners are not active in the daily running of the business, and whose liability for the partnership's debt is restricted to the amount invested in the business |
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