1. Financial Intermediaries Institutions that channel savings to investors; such as banks, insurance co.’s and credit unions

2. Nonbank financial institutions Nondepository institutions that channel savings to investors; like pension funds, finance co.’s.

3. Finance Companies Firms that make loans directly to consumers and they specialize in buying installment contracts from merchants.

4. Life Insurance Companies Collect premiums for policies and loan the cash to banks or small consumer finance co.’s.

5. Mutual Funds Companies that sell stock in itself, and use the cash to buy stocks and bonds of other companies.

6. Pension Funds Fund that collects and invests income until payments are made to eligible recipients.

7. Real Estate Investment Trusts (REIT) Company organized to make loans to home builders.

8. 1)Relationship between risk and return Investors demand a higher return to compensate for higher risks.

9. 2) Investment objectives What is the goal or objective for the acquired assets (retirement, vacation, etc)

10. 3) Consistency A regular basis of investing.

11. 4) Avoiding Complexity If an investment seems too complicated, let it go.

14. Bonds Long-term obligations that pay a stated rate of interest for a specified number of years. Lower risk than stocks.

15. 1)Bond components Are the coupon (stated interest), the maturity (life of the bond) and the principal (amount paid to lender).

16. 2) Bond Prices Supply and demand will establish the final price of bonds.

17. 3) Bond Yields Annual interest divided by the purchase price.

18. 4) Bond Ratings A method to check the quality of bonds. They use a letter scale. (A – the highest to D –default)

19. Certificates of Deposit (C.D.’s) loans investors make to financial institutions. Has FDIC to $100,000.

20. Corporate Bonds Second most important source of corporate funds.

21. Municipal Bonds Bonds issued by state and local governments.

22. Government Savings Bonds Sold by the federal government. They range from $50.00 to $10,000.00. Purchase price is ½ of the face value.

23. International bonds Foreign governments sell these starting at about $1 million.

24. Money Market Mutual Funds A business collects funds from small investors and then makes loans (usually c.d.’s) to other borrowers.

25. Treasury Notes and Bonds Notes – the federal government borrows funds with maturities of 2 -10 years. Bonds – maturities are 10-30 years. Both are considered safe investments.

26. Treasury bills T-Bill Minimum denomination $10,000. with maturities of 13, 26 or 52 weeks.

27. Individual Retirement Accounts IRA Long-term, tax-sheltered time deposits for an individual’s retirement. $2,000 per year (both working) $2,250 if one spouse doesn’t work

28. Capital Markets A market where $ is loaned for periods of more than one year.

29. Money Markets A market where $ is loaned for periods of less than one year.

30. Primary Markets If the original issuer is the only one that would redeem it.

31. Secondary Markets The market where existing securities can be resold to new owners.