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AC 19-
Financial Literacy
| Question | Answer |
|---|---|
| Financial Institution | A group that channels savings to investors (i.e. banks, insurance companies, savings, loan associations and credit unions) |
| Savings | 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 U.S. government institution that provides deposit insurance on the depositor’s account |
| Credit Unions | nonprofit services cooperatives that accepts deposits, makes loans and provides financial services |
| Risk | a situation in which the outcome is not certain, but the probabilities can be estimated |
| Passbook Account | The most common savings account. Typically a low minimum balance and used as an emergency fund |
| Money Market Deposit Account | A savings account with higher interest. Easy but infrequent withdrawals |
| Money Market Mutual Fund | A low risk account where deposits are invested into a pool of short-term financial accounts |
| Certificate of Deposit (CD) | A savings account that a depositor pays a certain amount with a fixed interest rate for a certain period of time |
| Demand Deposit Account (DDA) | An account whose funds can be removed by writing a check. No need to request for approval for the funds |
| 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 | a loan that is backed up with collateral |
| Unsecured | a loan guaranteed by a promise to repay it |
| capital formation | the transfer of money from households to businesses and government through investments and loans |
| sole proprietorship | unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; |
| 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 or 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 |
| corporation | form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, |
| stockholder | people who own a share or shares of stock in a corporation; same as shareholders |
| stocks | certificates of ownership in a corporation; common or preferred stock |
| dividend | checks paid to stockholders, usually quarterly, representing portion of corporate profits |
| preferred stock | form of stock with no voting privileges; has a higher claim on corporate income and assets than does common stock |
| common stock | most basic form of corporate ownership, generally with one vote per share for stockholders |
| portfolio diversification | strategy of holding different investments to minimize risk |
| mutual fund | company that sells shares of a portfolio of securities, e.g., stocks and bonds issued by other companies |
| stockbroker | person who buys or sells securities for investors |
| maturity | life of a bond, length of time funds are borrowed |
| defaulted | unable to repay borrowed money |
| premiums | price for insurance that must be paid monthly, quarterly or annually |
| deductible | amount paid before insurance can be paid |
| fixed rate mortgage | interest rates do not change over time |
| adjustable rate mortgage (ARM) | interest rates will vary over time |
| hybrid morgage | has features from fixed and adjustable rate mortgages |
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