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ECON2 Chapter 11
| Question | Answer |
|---|---|
| income not used for consumption | savings |
| is the use of income today that allows for a future benefit. | Investment |
| all the institutions that help transfer funds between savers and investors | financial system |
| a claim on a borrower’s property | financial asset |
| a situation in which buyers and sellers exchange financial assets | financial market |
| an institution that collects funds from savers and invests these funds in financial assets | financial intermediary |
| an investment company that gathers money from individual investors and uses the money to purchase a range of financial assets | mutual fund |
| a market in which long-term financial assets are bought and sold | capital market |
| a market in which short-term financial assets are bought and sold | money market |
| a market for buying and selling newly created financial assets directly from the issuing entity | primary market |
| a market in which financial assets are resold | secondary market |
| a financial goal that is used to determine if an investment is appropriate | investment objective |
| the possibility for loss on an investment | risk |
| the profit or loss made on an investment | return |
| the practice of distributing investments among different financial assets to maximize return and limit risk | diversification |
| a secondary market where securities are bought and sold | stock exchange |
| the profit made from the sale of securities | capital gain |
| a share of ownership in a corporation that gives the holder voting rights and a share of profits | common stock |
| a share of ownership in a corporation giving the holder a share of profits but, in general, no voting rights | preferred stock |
| an agent who buys and sells securities for customers | stockbroker |
| a contract to buy or sell a stock on a specified future date at a preset price | future |
| a contract giving an investor the right to buy or sell stock at a future date at a preset price | option |
| an instrument used to measure and report the change in prices of a set of stocks | stock index |
| a situation in which stock market prices rise steadily over time | bull market |
| a situation in which stock market prices decline steadily over time | bear market |
| the amount that a bond issuer promises to pay the buyer at maturity | par value |
| the date when a bond is due to be repaid | maturity |
| the interest rate a bond-holder receives every year until the bond matures | coupon rate |
| the annual rate of return on a bond | yield |
| a high-risk, high-yield corporate bond | junk bond |
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