ECON 333 TEST 1 GUIDE.pdf - ECON 333 Test I Study online at...

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1. Annual Interest 1+Ia=(1+Im)^12 2. Centralized Exchange Where buyers and sellers physically meet to complete transactions. May be limited during times of disaster. Ex. NYSE 3. Commodity Money Used in exchange, but also has other uses. Ex. salt, silk, gold. 4. CPI Collected price data on a fixed basket of goods and services purchased by typical household. 5. Debt Market Short term assets are bought and sold. T- Bills (<1y), M3 Commercial paper 6. Depository Financial Institution Firms that accept deposits and make loans. Ex banks, credit unions. 7. Derivative Payoffs from underlying instrument or other asset value. 8. Derivative Market Trading securities that derive their value from other securities. Ex. Options, future, forwards, swaps. 9. Diversification Spreading wealth across a variety of assets in order to reduce idiosyncratic risks. 10. Equity Market Financial market where stock is traded. 11. Expected Value Probability weighted average return for an investment. 12. Expected Value Formula E(x)=(p1 X1)+(p2 X2)... 13. Fiat Money Gets value from gov't decree and has no value other than money. 14. Financial Institution Firms that specialize in providing access to financial markets and products. Ex. Banks 15. Financial Instrument Written legal obligation for one party to transfer funds to another on a certain date or conditions. Ex. Stock portfolio, insurance, bond, mortgage backed security.
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