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Flashcards in quiz Deck (19)
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1
Q

If interest rate is 5% and you receive a gift of $100 how much would that gift be worth in 3 years?

A

100(1.05)^3= 115.76

2
Q

Crowding out

A

a decrease in investment that results from government borrowing

3
Q

financial intermediaries

A

financial institutions through which savers can indirectly provide funds to borrowers
banks and mutual funds

4
Q

bond

A

certificate of indebtedness

5
Q

mutual fund

A

an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

6
Q

Melissa offers you 1,000 dollars today or 1,500 in five years, the interest rate is 8%

A

1,000 (1.08)^5=1,469.32

7
Q

diversification

A

reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks

8
Q

real interest rate

A

the interest rate corrected for the effects of inflation

9
Q

two most important financial markets

A

bond and stock market

10
Q

Put 500 dollars in savings account with an interest rate of 5%, the future value in one year

A

500(1.05)=525

11
Q

Primary advantage of mutual funds

A

They allow people with small amounts of money to diversify their holdings (diversification)

12
Q

stock

A

share of ownership in a corporation

13
Q

stock price

A
Undervalued if Price < Value
-
Overvalued if Price > Value
-
Fairly valued if Price = Value
14
Q

loanable funds

A

money available for lending and borrowing

15
Q

source of supply of loanable funds

A

The supply of loanable funds comes from people and organizations, such as government and businesses, that have decided not to spend some of their money, but instead, save it for investment purposes

16
Q

properties of owning corporate stock

A

.

17
Q

The primary economic function of the financial system

A

-match one person’s saving with another person’s investment
-Moves the economy’s scarce resources
from savers to borrowers

18
Q

If you are starting a business you might buy desks, chairs, and lamps which would be considered ___

A

investment

19
Q

If you raise the funds to purchase those items you are a ___

A

.