Financial Markets
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| Saving | absence of spending that frees resource for use in other activities or investments
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| Savings | the dollars that become available for investors to use when others save
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| Certificate of Deposit | document showing an investor has made an interest-bearing loan to financial institution
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| Financial Asset | a stock or other document that represents a claim on the income and property of a borrower, such as a CD, bond, Treasury bill, or mortgage
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| Financial System | network of savers, investors, an financial institutions working together to transfer savings for investment uses
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| Financial Intermediary | institution that channels savings to investors
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| Nonbank Financial Institution | nondepository institution that channels savings to investors
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| Finance Company | firm that makes loans directly to consumers and specializes in buying installment contracts from merchants who sell on credit
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| Premium | price paid at regular intervals for an insurance policy
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| Pension | regular payment to someone who has worked a certain number of yrs, reached certain age, or suffered injury
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| Pension Fund | fund collects and invests income until payments made to eligible recipients
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| Risk | situation in which outcome is not certain, but the probabilities can be estimated
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| Bond | contract to repay borrowed money and interest on borrowed money at regular future intervals
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| Coupon Rate | stated interest on a corporate, municipal, or gov bond
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| Maturity | life of a bond or length of time funds are borrowed
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| Par Value | principal of a bond or total amount borrowed
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| Current Yield | bond’s annual coupon interest divided by purchase price; measure of bond’s return
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| Junk Bond | bond carrying exceptionally high risk of nonpayment and a low rating
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| Municipal Bond | bond, often tax exempt, issued by state and local govs
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| Tax-Exempt | non subject to tax by fed or state gov
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| Savings Bond | low-denomination, non-transferable bond issued by fed gov
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| Beneficiary | person designated to take ownership of an asset if owner of asset dies
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| Treasury Note | U.S. gov obligation with maturity of 2 to 10 yrs
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| Treasury Bond | U.S. gov bond with maturity of 10 to 30 yr
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| Treasury Bill | short-term U.S. gov obligation with maturity of one yr or less in denominations of $1,000
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| Individual Retirement Account (IRA) | retirement account in form of long-term time deposit with annual contributions not taxed until withdrawn during retirement
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| Capital Market | market in which financial capital is loaned and/or borrowed for more than one yr
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| Money Market | market where financial capital is loaned and/or borrowed for one yr or less
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| Primary Market | market in which only original issuer can sell or repurchase financial asset
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| Secondary Market | market where financial assets can be sold to someone other than original issuer
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| Equities | stocks that represent ownership shares in corporations
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| Stockbroker | person who buys or sells securities for investors
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| Efficient Market Hypothesis (EMH) | argument that stocks are always priced about right because they are closely watched (supply and demand)
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| Portfolio Diversification | strategy of holding diff investments to protect against risk
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| Mutual Fund | company that sells stock in itself and uses the proceeds to buy stocks and bonds issued by other companies (collect money and then invest; diversify portfolio)
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| Net Asset Value (NAV) | the market value of mutual fund share found by dividing net value of fund by number of shares issued
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| 401(k) Plan | tax-deferred investment and savings plan that acts as a personal pension fund for employees
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| Stock Exchange | physical place where buyers and sellers meet to exchange securities
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| Securities Exchange | physical place where buyers and sellers meet to exchange securities
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| Over-the-Counter Market (OTC) | electronic marketplace for securities not listed on organized exchanges such as the NYSE
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| Dow Jones Industrial Average (DJIA) | measure of stock market performance based on 30 representative stocks
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| Standard & Poor's 500 (S&P 500) | measure of stock market performance based on 500 stocks traded on the NYSE, AME, and OTC market
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| Bull Market | period during which stock market prices move up for several months or yrs in a row
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| Bear Market | period during which stock market prices move down for several months or yrs in a row
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| Spot Market | market in which a transaction is made immediately at the prevailing price
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| Futures Contract | agreement to buy or sell at a specific date in the future at a predetermined price
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| Option | futures contract giving a buyer the right to cancel the contract
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| Call Option | futures contract giving buyer right to cancel a contract to buy something
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| Put Option | futures contract giving buyer right to cancel a contract to sell something
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