Vocab I
Certificates of deposit that have small denominations
Retail CDs
Prices online and in financial new publications
Quotations
The name of the asset management account that sweeps any unused balance in the brokerage account into a money market investment at the end of each business day
Sweep account
In terms of investments and money management, how do we define risk?
The potential for loss
The nickname for Treasury bills
T-bills
Paychecks go directly to your financial institution
Direct deposit
Your ability to cover any cash deficiencies that you may experience
Liquidity
An account that combines deposit accounts with a brokerage account and provides a single consolidated statement
Asset Management Account
The three levels of risk
Low, moderate, & high
The length of something that is "short-term"
One year or less
An arrangement that protects a customer who writes a check for an amount that exceeds the checking account balance; it is a short-term loan from the depository institution where the checking account is maintained
Overdraft protection
A financial institution's notice that it will not honor a check if someone tries to cash it; usually occurs in response to a request by the writer of the check
Stop payment
A type of deposit offered by depository institutions that provides checking services and pays interest
NOW (negotiable order of withdrawal) account
The risk that a borrower may not repay on a timely basis
Credit risk or Default risk
The level or amount of interest that a checking account has
A series of decisions made over a short-term period regarding cash inflows and outflows
Money management
A market where existing securities such as Treasury bills can be purchased or sold
Secondary market
Accounts that pool money from individuals and invest in securities that have a short-term maturity
Money Market Funds (MMFs)
The risk that the value of an investment could decline as a result of a change in interest rates
Interest rate risk
Provide an example of an account that is considered "liquid" or "very liquid"
1. Checking account
2. NOW account
3. Savings account
4. Money market fund (MMF)
Short-term debt securities issued by large corporations that typically offer a slightly higher return than Treasury bills
Commercial paper
Treasury securities with maturities of one year or less
Treasury bills
Money Market Deposit Account (MMDA)
The potential loss that could occur as a result of converting an investment into cash
Liquidity risk
What is one impact of a strong economy on liquidity?
2. Income is more secure
3. Less reliance on other sources or funds to cover expenses