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Banking and Finance
BPA
| Term | Definition |
|---|---|
| Types of accounts offered | Savings, checkings, CDs, all FDIC insured Money Market accounts are not FDIC insured, and pay more interest |
| Bouncing a check | When you write a check for more than you have in your bank account |
| Negotiable instrument | a written order promising to pay a sum of money includes checks, bank drafts, cashiers checks, bills of exchange, promissory notes |
| Overdraft protection | service to protect you from overdrawing from your checking account. An automatic, short term loan |
| Bank reconciliation report | used to balance checkbooks |
| Blank endorsment | just signing the back of a check |
| Restrictive endorsement | writing "for deposit only" and signing it, limits what can be done with a check |
| Full/regular/special endorsement | "pay to the order of ____" and signing |
| drawer | the person that signs the check |
| payee | person receiving money from a check |
| what to do when you made a mistake when writing a check | write "VOID" across the front of check and save in records |
| Teller | who you should endorse checks with |
| you should...(checks) | shred old bank statements and cancelled checks, always fill in spaces |
| what to do when balancing your checkbook | subtract outstanding checks from the bank balance |
| Bank tellers | balance cash drawers, provide money to customers, sell bank products, sell savings bonds do NOT manage large sums of money placed in trust with the bank according to clients wish |
| For a bank.. | deposits are liabilities, loans are assets |
| FDIC | insures accounts for up to 250k |
| checking account | most common form of transaction account, basic checking accounts do not always pay interest on deposits |
| non customers of banks that try to cash checks | have higher fees, require fingerprints, ability to be refused |
| time deposits | savings accounts, money market accounts, and CDs |
| safe deposit boxes | kept in the bank vault to secure valuables |
| passbook savings account | unlikely to encounter |
| cashiers check | a check issued against bank funds, A check written by the bank on its own funds |
| certified checks | personal check that has a banks guarantee that it will be paid |
| The Federal Reserve | central bank of US, regulates banks, conducts bank examinations, provides loans to banks, conducts monetary policy. There are 12 federal reserve banks. |
| Discount rate | rate Fed Reserve charges banks to borrow from it |
| competition amongst banks | provides more services and lowers cost of savings producgs |
| money creation is influenced by | the Fed's supply and control of money, banks' use of money, and demand for money, NOT how much is being printed |
| EFT | electronic funds transfer, moving money electronically from one account/bank to another |
| strong demand for currency if there is | low inflation, high interest rates, positive trade balance and economy |
| Prime Rate | the rate banks charge their best customers, usually the same among major banks |
| Federal Funds Rate | the rate banks charge each other |
| Simple interest | PxRxT (Principal x Rate x Time) P(1+rt) |
| Compound interest | Px(1+R)^T |
| Finance charge | the amount of interest you pay on a loan to calculate, multiply the amount of each payments x the number of payments, then subtract original amount of the loan to write as a percent, divide it by the original amount of loan |
| Rule of 72 | tells how many years it takes to double your money 72/interest rate |
| ordinary year | 360 days |
| 3 C's of credit | Character, Capacity, Collateral |
| 5 C's of lending | Character, Capacity, Collateral, Capital, Conditions |
| Revolving/open ended credit accounts | credit cards, charge cards(pay back in full each month) |
| minimum payment on a credit card | smallest amount you must pay in order to keep account in good standing |
| Grace period | time between billing date and when interest will be charged |
| Installment credit accounts | mortgages, car loans, student loans |
| Credit limit/line of credit | max amount you can borrow from creditor |
| Secured loans | backed by assets (ex: car loan) you can use any assets for collateral on a loan |
| Unsecured loans | not backed by anything but the creditworthiness of the borrower |
| services that should be avoided | payday loans and check cashing services bc they are expensive |
| Credit/FICO score | most weight on payment history |
| a point on a mortage | equal to 1% of the loan |
| reverse mortgage | repaid when borrower dies |
| SBA-backed loan | used to purchase new equipment or expand operations, you cannot use the funds to pay taxes, debt, or finance floor plan needs |
| a construction loan is often packaged with | a real estate loan |
| commercial lending(to businesses) | largest dollar market for lending |
| Premium | amount each month that is paid for insurance |
| deductible | minimum amount you must pay out of pocket before insurance starts to pay |
| life insurance policy beneficiary(person who benefits?) | the individual who receives the death benefits |
| workers compensation | business insurance that pays for medical care of workers injured on the job |
| lien | a legal claim a lender has on a property to secure a debt |
| Fair Credit Reporting Act | credit reports |
| Equal Credit Opportunity Act | no discrimination |
| Truth in Lending Act | full disclosure to customers about costs of a loan |
| Fair Debt collection Practices Act | collection agencies |
| subsidiary ledgers | an element of internal control |
| assets | any items of value |
| capital gains | earned when you sell an investment for more than you paid for it total income earned/total assets |
| 3 major stock markets in US | NYSE(New York stock exchange, oldest, large well-known companies), NASDAQ (tech stocks) AMEX(American stock exchange, smaller companies) |
| bull market | people are confident in economy, stocks going up |
| bear market | people are pessimistic about economy, stocks going down |
| liquidity | how quickly you can get your money back from an investment cash in pocket is most liquid, then checking, savings accounts, CDs, stocks and bonds, and real estate. |
| Check number | found in top right corner of check |
| memo | what check is for, small description |
| drawee(the bank) | listed on check |
| bank transit/routing number | under memo, first set of numbers |
| account number | under memo, second set of numbers |
| age when withdrawals can be made from an IRA without penalty | 59.5 |
| collateral | personal property put up to guarantee a loan should the borrower fail to repay |
| fair labor standards act | gave us minimum age |
| private mortgage insurance | protects the lender—not you—if you stop making payments on your loan if you put 20% down, you can avoid paying it |
| banks can charge higher interest rates than they pay depositors | true |
| a financial intermediary | an entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment bank, mutual fund, or pension fund, loan company |
| return on equity | a measure of financial performance calculated by dividing net income by shareholders' equity |
| buying in margin | when an investor buys an asset by borrowing the balance from a bank or broker. Buying on margin refers to the initial payment made to the broker for the asset—for example, 10% down and 90% financed. NOT an effective long-term investment strategy |
| credit unions | non profit |
| annuity | insurance contracts that provide a fixed income stream for a person's lifetime or a specified period of time. Annuities are often used as a way to fund retirement |
| certificate of deposit (CD) | a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. more liquid than savings account |
| reverse mortgage | HAS to be repaid |
| speculative investments | a high degree of risk where the focus of the purchaser is on price fluctuations. The investor buys the tradable good (financial instrument) in an attempt to profit from market value changes. ex: metals, gems, collectibles |
| leverage | the use of borrowed money to make an investment |
| purpose of savings | provide for short term needs |
| drawee | the person or organization, typically a bank, who must pay a draft or bill. |
| social security tax | The federal tax that is deducted from your paycheck each pay period that provides for retirement, disability, and survivor benefits is |
| installment loans | An installment loan is a type of loan where you borrow a set amount of money all at one time. You then repay the loan over a fixed number of payments, called installments. |
| small claims court | deals with legal disputes that involve dollar amounts below a certain limit, which varies from state-to-state |
| checkbook register | A form used to record all transaction activity in a checking account |
| Most financial experts agree that families should set aide at least ___ of their disposable income each pay period. | 10% |
| Minors are not considered competent parties to enter into an agreement | true |
| credit reports | updated when lenders provide new information to the nationwide credit reporting agencies for your accounts. |
| tax liability | The total amount of taxes owed |
| equity | The value of a house less the amount still owed on the money borrowed to purchase it |
| net pay | The amount of your take home pay |
| Savings institutions | banks that serve a local community. They take the deposits of local residents and lend the money back in the form of consumer loans, mortgages, and small business loans. a majority of their assets in housing-related loan |
| regular savings account | allows deposits and withdrawals; may require a minimum balance to keep the account open; earns interest; and may limit the number of times you can withdraw money |
| banks | governed by federal and state laws and regulations? |
| money market accounts | earns higher interest; may require a higher minimum balance; and provides checks for withdrawals |
| APR | annual percentage rate a measurement used to compare different loans, taking into account interest rate, term and fees |
| commercial paper | o provide a medium of exchange that is readily transferrable like money and to provide an extension of credit |
| ARM | adjustable rate mortgage |
| NAV | |
| qualified withdrawals from a ROth IRA are | tax-free |
| rule of thumb | more risk, more interest |
| Social Security Tax | includes a cap on annual earnings |
| preferred stock v common stock | preferred gives no voting rights to shareholders Preferred have priority over a company's income, are paid dividends before common Common are last to company assets (they will be paid out after creditors, bondholders, and preferred shareholders) |
| Federal Income Tax return due | April 15 |
| bond | A debt investment in which the investor loans money to an entity that borrows the funds for a defined period of time at a fixed interest rate is known as a |
| capital gains | 21. Taxes the government levies on the profit an individual realizes when they sell an asset are ________ taxes. |
| deferred load on a mutual fund | commision paid when you sell |
| form 1040 | annual income tax return |
| form 1040EZ | completed in april, quick, cannot be used if you have dependents or investment income |
| w-2 | how much you earned and how much paid in taxes |
| w-4 | start a job, list info about you and family, determines how much money gets taken out of paycheck |
| 1099 | Received in January, get one if you are not an employee but were paid by a company, taxes didn't get withheld if you receive one, so you might have a big tax bill coming up |
| 1-9 | received when starting a new job, used to prove us work eleigibility, forms of identification |
| Treasury/T-bill | short-dated government security, yielding no interest but issued at a discount on its redemption price. |
| taxable income | salary, hourly wage, tips, freelance work, investments, stocks, |
| standard deduction (IRS) | portion of income that is not subject to tax that can be used to reduce your tax bill. |
| tax refund | when you pay more taxes to your state government or the federal government than your actual tax liability. |
| tax deferred earnings | Earnings that are taxed in the year of withdrawal instead of the year they are earned |
| Roth IRA | that includes an income limit for eligibility |
| CD/ceritificate of deposit | pays interest |
| 3 common credit reporting agencies | equifax, transunion, experian |
| vesting | process by which an employee with a qualified retirement plan becomes entitled to the money within that plan |
| comprehensive coverage | protects from damage that isn't caused by a colision |
Created by:
di09
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