savings and financial systems

financial systems: network of savers, investors and financial institutions that work together to transfer savings to investments uses.

credit union: nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services.

finance company: firm that makes loans to consumers and specializes in buying installment contracts from merchants who sell on credit.

premium: monthly, quarterly, semi-annual price paid for an insurance policy.

savings and financial systems

banks

pension funds: collect contributions from employees, pay out benefits, and invest holdings in stocks and bonds

finance companies

accepts deposits and lend money

make loans to consumers and buy installment contracts from merchants who sell goods on credit

life insurance companies: collect cash through insurance premiums and loan surplus funds to others

financial intermediaries: institutions that channel savings to investors; banks, insurance companies, savings and loan associations, credit unions

savings: the dollars that become available for investors to use when others save.

certificate of deposit (CD): receipt showing that an investor has made an interesting-bearing loan to the financial institution.

financial assets: stocks or documents that represent a claim on the income and property of the borrower; CD's , bonds, treasury bills , and mortgages,

pension fund: fund that collects an invests income until payments are made to eligible recipients.

pension: regular allowance fr someone who has worked a certain number of years, reached a certain age, or who has suffered from an injury.

diversification: the technique of spreading funds over a large number of investments to reduce the portfolio's overall risk.

risk: a situation in which the outcome is not certain, but the probabilities can be estimated.

compensation: something, such as money, given or received as an equivalent for goods or services, injury, debt, or high risk.

bond: formal contract to repay borrowed money on interest on the borrowed money at regular future intervals.

par value: principal of a bond or a total amount borrowed.

maturity: life of a bond or length of time funds are borrowed.

coupon rate: stated interest on a corporate, municipal or government bond.

current yield: bond's annual coupon interest divided by purchase price; measure of a bond's return.

junk bonds: exceptionally risky bond with a Standard & Poor's rating of BB or lower that carries a high rate of return as compensation for the higher possibility of non-payment.

tax-exempt: not subject to tax by federal or state governments.

savings bond: low-denomination, non-transferable bond issued by the federal Gov't, usually through payroll savings plan.

beneficiary: person designated to take ownership of an asset if the owner of the asset dies.

EE savings bonds:low-denomination, non-transferable bond issued by the federal Gov't, usually through payroll savings plan.

treasury note: United States Gov't obligation with a maturity of 2 to 10 years.

treasury bonds: United states government bond with maturity of 30 years

treasury bills: short-term United States government obligation with a maturity of 4, 13, 26, or 52 weeks and a minimum denomination of $100

Individual Retirement Accounts (IRAs): retirement account in the form of a long-term time deposit, with annual contributions not taxed until withdrawn during retirement.

capital market: market in which financial capital is loaned and/or borrowed for more than one year.

money market: a market in which financial capital loaned and/or borrowed for one year or less.

primary Market: market in which only the original issuer can sell or repurchase a financial asset; government savings bonds, IRAs, small CDs.

secondary market: market in which all financial assets can be sold to someone other than the original issuer; corporate bonds, government bonds.