Money and Changes
As opposed to money, currency is
The actual paper and coin money
What are reserves?
Money banks keep to pay out to people.
What is liquidity?
Being able to be converted into cash.
What is the interest rate for a bond called?
coupon rate
What unit is used to measure the number of stocks a person has?
Shares
What is representative money?
Money with something valuable behind it
What is the difference between M1 money and M2 money?
M1 is easily used as cash or converted into, M2 requires more of a process
What is the relationship between rick and return in regard to investments?
More risk means more potential for return
Say the U.S. government wants to revamp the nation's interstate highways, what kind of bond would they issue?
Savings bond.
What has to happen for a person to earn capital gains?
Sell a stock for more than the purchase price.
What is fiat money?
Money with worth because the government says it does.
Give two examples of M2 money
M1 money, savings accounts CDs, money market mutual funds
What is the difference between a hedge fund and a mutual fund?
A hedge fund is private and not regulated. They also tend to engage in more risky investment.
The city of Cerritos wants to construct some more parks, what kind of bond do they issue?
Municipal
what is the difference between income stock and growth stock?
Income stock pays dividends, growth stock does not
What is it called when a large number of people suddenly want to pull their money out of banks?
A bank run
Which of the following investments is/are FDIC insured? Cds, savings accounts, money markets, savings bonds, mutual funds, stocks.
CDs, money markets and savings accounts.
Explain two benefits of using a financial intermediary.
Share risk (diversification, give information, and providing liquidity.
Which of the following would be traded on the money market? (can be more than one) A. $2,000, 3%, 1 year B. $4,000, 18%, 3 years C. $5,000, 7%, 10 months D. $3,000, 6%, 5 years
A and C
Arrange the following stocks in least to most risky. income stock, growth stock, blue chip stock, futures.
blue chip, income, growth, futures
Why couldn't the Fed stop the Great Depression?
They still worked independently, did not have a centralized enough structure
How does the structure of the Fed create a balance between federal control and private ownership?
Arrange the following investments from least to most risky for a person to directly invest in: savings account, bond, mutual fund, CD, stock, money market mutual.
savings account, CD, money market, mutual fund, bond, stock
Which bond(s) would be traded on both the capital and secondary market?
A. Savings bond, $6,000, 2%, 5 years
B. Junk bond, $3,000, 18%, 1 year
C. Corporate bond, $8,000, 7%, 2 years
D. Municipal bond, $2,000, 6%, 3 years
C and D
Arrange the following investments in order of least to most risk for a person to directly invest in: CD, growth stock, money market, savings bond, junk bond, options, mutual funds, income stock.
CD, money market, savings bond, mutual fund, junk bond, income stock, growth stock, options.