Money/History of American Banking (1-22)
a) Define 'Money'
b) What is a Medium of Exchange?
a) Anything that serves as a medium of exchange, a unit of account, and a store of value
b) Anything that is used to determine value during the exchange of goods and services (barter)
Differentiate M1 and M2 in measurement of money supply
M1: Represents money that people can gain access to easily and immediately to pay for goods and services
M2: The additional funds that cannot be
used as cash directly but can be converted to cash fairly easily
percent of all business that fail
1/2 or 50%
Define bonds
Certificates sold by the company or gov. to finance projects or expansion
Define Equities and Shares
Share: portion of a stock
Equities: claims of ownership in a corporation
Name the six characteristics of money?
1. Durability (wear and tear)
2. Portability (Money travel)
3. Divisibility (smaller denominations)
4. Uniformity (Any 2, same buy)
5. Limited Supply (Control)
6. Acceptability (Confidence)
Define Default
Failure to pay back a loan
describe diversifications significance
Allocating your funds across a range of investments and asset classes is what diversification entails. By having a diversified portfolio, you can lower the level of risk and potentially achieve a greater return. The most significant diversification advantages come from investments that exhibit opposing movements.
Highest and lowest bond rating?
AAA and D
What are the 2 main benefits of buying stock?
Dividends and Capital Gains
a) When was the first bank of the United States established? How long?
b) When was the Second bank of the United States Established? How long?
a) 1791, 20 years
b) 1816, 20 years
a) Define Interest?
b) Define Principal?
a) the price paid for the use of borrowed money
b) the amount of money borrowed
What 3 advantages do financial intermediaries offer
1. shared risk
2. provide informations
3. provide liquidity to investors
difference between capital and money markets?
Capital is money lent for over a year whereas money markets is lent over less than a year
When was the collapse of the stock market?
1929
What 4 things did the Wildcat Era bring about in terms of conflict?
A widespread panic within the banks that brought people to anxiety about their assets, leading to people trying to redeem their money, Wildcat banks lead to banks not having enough equivalent to paper print, banks began committing fraud, States introduced to many variances of currency.
What are the cost and benefits of using consumer credit?
Anything along the lines of
- interest fees
- spend beyond means
- increased pay off, increase credit
- default, decreased credit
- fraud
define mutual and pension funds
mutual funds: funds that pool the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
pension funds: Income that a retiree receives after working a certain number of years or reaching a certain age
who stays in oversight of corporate bonds?
Securities and Exchange commissions,
Standard and Poor's and Moody's
Define Bull Market and Bear Market
Bull Market: A steady rise in the stock market over a period of time
Bear Market: A steady drop in the stock market of a period of time
a) What 3 powers were granted to the federal government?
1- Charter Banks
2- Required banks to hold equivalent gold/silver to bank notes
3- issue a single national currency
The consumer's savings bank of worcester, MA introduced this?
negotiable order of withdraw (NOW) accounts
what is prospectus?
An investments report to potential investors
What does the Standard and Poor's and Moody's do
Provides a unique rating system that can measure both long term and short term debts as well as indicate a bond's default risk alongside an issuer's financial stability
Stocks Vs. Bonds
Stocks often offer higher profits
Higher risk = higher reward
Bonds must be paid back like a loan
Lower risk = lower reward