1. Econ ch.12 1. ________ money makes economic growth possible. 2. One person’s savings can represent another person’s ______.

2. Sec 1  3. A financial system consists of a network of savers, investors, and financial institutions that work together to transfer savings to investors.  4. Financial ______ include savings accounts, certificates of deposit, and government & corporate bonds.

3. Sec 1  5. Financial assets represent claims on the borrower.  6. Any part of the economy can supply & borrow savings, but _____ and businesses are the largest borrowers.  7. _________ companies offer bill consolidation loans to consumers who use these loans to pay off other bills, & then pay off the finance company over time.

4. Sec 1  8. Life insurance companies receive money by selling life insurance for a ___________, monthly, quarterly, or _________ fee.  9. _________ funds are companies that sell shares of their own stock to individual investors & invest the money they receive in corporate stocks & bonds.

5. Sec 1  10. Mutual funds give people the ability to invest in the market at ___ risk.  11. _______ funds receive money from employers & invest the money in corporate stocks & bonds to be disbursed among the employees eligible for retirement, old-age, or disability.

6. Sec 2  1. High risk investments pay higher rates of return that low risk investments.  2. The type of investment chosen depends on the goals of the investor.  3. Consistent investing can yield large returns.

7. Sec 2  4. Investors should avoid complex investments they do not understand  5. A ____(k) is a tax-deferred investment plan that acts as a personal pension fund for employees.  6. _______ have three main components; the coupon, the maturity, & the par value.

8. Sec 2  7. Bond prices are determined by ________ & _________.  8. The current _________ on a bond is the annual interest rate divided by the purchase price.  9. Most bonds are rated on the financial health of the issuer, the ability to make future coupon & principal payment, & the issuer’s past credit history.

9. Sec 2  10. Bond ratings, ranging from __ (lowest) to ____ (highest), indicate the quality of the bond.  11. __________________ are issued by financial institutions & are the most common form of investments available.  12. Municipal bonds are issued by state & locals gov’ts and are considered safe, tax- exempt investment.

10. Sec 2  13. _______ bonds are low- denomination, nontransferable bonds issued by the federal gov’t.  14. _________ notes & bonds are large long-term obligations issued by the federal gov’t and are seen as the safest of all financial assets.  15. Treasury bill are large short-term obligations issued by the federal gov’t.

11. Sec 2  16. ___________________ (IRA) are long-term, tax-sheltered time deposits intended for retirement.  17. Capital markets are markets in which money is loaned for more than one year. Money markets are markets in which money is loaned for less than one year.

12. Sec 3  1. The _________ Market Hypothesis states that it is not possible to “beat the market” regularly.  2. Instead of trying to beat the market, investors should diversify their portfolios by holding a large number of stocks.  3. The ___________ Stock Exchange (NYSE) lists the shares of about 2,800 large companies, & has 1,400 seats or memberships with access to the trading floor.

13. Sec 3  4. The _________ Stock Exchange (AMEX) lists the shares of about 750 companies.  5. Most shares are not traded on exchanges over-the-counter (OTC) trades.  6. ___________ lists information on companies traded OTC.

14. Sec 3  7. The ___________ Industrial Average is an index made up of 30 stocks.  8. _________________500 is an index made up of 500 representative stocks.  9. A ____ market is a market in which prices are rising; a _______ market is a market in which prices are falling.