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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 |
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