Financial Markets

16 flashcards · Economics · by Logan Pollack

1. Inevestment

   the act of redirecting resources from being consumed today so that they may create benefits in the future

2. Investment promotes economic growth, and contributes to a nation's wealth

3. Necessary for investment to occur

   Financial System

4. A financial system includes savers, lenders, investors and borrowers and allows the transfer of money between them to take place

5. Financial Assets

   a non-physical asset that gets its value from a contractual right or ownership claim

6. When people save, they are essentially lending money

7. Financial Intermediares

   These are institutions that help channel funds from savers Act as a "middleman" between two parties in a financial transaction

8. Examples of Financial Intermediaries

   Banks Finance Companies Life Insurance Companies Pension Funds

9. Mutual Funds

   pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets

10. Dealing with intermediaries offers the following advantages:

    providing information providing liquidity to investors

11. Diversification

    the strategy of spreading out investments to reduce risks

12. Financial Intermediaries diversify your investments so you don't lose all of your funds if a single investment fails

13. As required by law, all intermediaries provide information to potential investors in an investment report called a prospectus

14. Liquidity

    refers to the ease with which people can convent an asset into cash

15. Return

    the money on investor receives above and beyond the sum of money initially invested

16. Higher return investments might not be as liquid as lower return investments