1. Unit 4

2. Money Three Uses: Medium of Exchange Barter Economy vs. Monetary Economy Unit of Account Store of Value Six Characteristics of Currency Durability Portability Divisibility Uniformity Acceptability Limited Supply

3. Sources of Money Commodity Money Representative Money Fiat Money Crypto-currency?

4. Banking 2 Types Private Banks National Banks Monetary Supply Liquidity M1 M2 Functions Store Money Save Money Savings Accounts Checking Accounts Debit Cards Money Market Accounts CDs (Certificates of Deposit) Make Loans Mortgages Credit Cards

5. Fractional Asset Banking BANK How Banks Make a Profit Deposits from customers Interest from borrowers Fees for services Money enters bank Money leaves bank Interest and withdrawals to customers Money loaned to borrowers: business loans home mortgages personal loans Bank’s cost of doing business: salaries taxes other costs Bank retains required reserves

7. Loans Principal Interest Compound Interest Default Foreclosure

8. Investing Goals Keeping up with inflation Saving for retirement Profits Financial Assets Bank Accounts Pension Bonds Real Estate Stocks Risk Risk vs. Return Diversification FDIC Portfolios Prospectus

9. Intermediaries Financial Intermediaries Commercial banks Savings & loan associations Savings banks Mutual savings banks Credit unions Financial Institutions that make loans to… Life insurance companies Mutual funds Pension funds Finance companies Investors Savers make deposits to…

10. Bonds Three Components Coupon Rate Maturity Par Value Discounts from Par Bond purchase without discount from par = 1.Sharon buys a bond with a par value of $1,000 at 5 percent interest. 2.Interest rates go up to 6 percent. 3.Sharon needs to sell her bond. Nate wants to buy it, but is unwilling to buy a bond at 5 percent interest when the current rate is 6 percent. 4.Sharon offers to discount the bond, taking $40 off the price and selling it for $960. 5.Nate accepts the offer. He now owns a $1,000 bond paying 5 percent interest, which he purchased at a discount from par. Bond purchase with discount from par =

11. Bond Ratings Standard & Poor’s / Moody’s / Finch’s AAA AA+/- A +/- BBB +/- BB +/- B +/- CCC +/- CC +/- C +/- D Bond Benefits Low Risk Bond Risks Default Fixed Rates No control

12. Types of Bonds Savings Bonds Treasury Bonds (T-Bills) Municipal Bonds (Munis) Corporate Bonds Junk Bonds

13. Financial Markets How Long? Capital Markets Money Markets Who’s Selling? Primary Markets Secondary Markets

14. Stock Market Shares Equities Profit Quarterly Dividends (Income Stock) Capital Gains (Growth Stock) Types of Shares Common Stock (Voting) Preferred Stock (Non-Voting) Stock Splits

15. Trading Stocks Brokerage Firms Stockbroker Stock Exchanges Stock Traders The NYSE The Dow The S&P 500 OTC Market Nasdaq Daytrading

16. Financial Instruments Futures Options Call option Put option Shorting Market Environment Bull Market Bear Market

17. Illegal Trading Stock Manipulation Pump and Dump Short and Distort Insider Trading Dummy Corporations Boiler Rooms Ponzi Schemes The SEC