1. Money, Banking, & Finance Money & Banking Federal Reserve Managing Your Money Planning & Budgeting Saving & Investing Bonds & Other Financial Assets The Stock Market How to Read Stocks

2. Money & Banking Money Fiat/Legal Tender – money that has value because a government fiat, or order, has established it as acceptable for payment of debts. Medium of Exchange – use of money in exchange for goods or services. Unit of Accounting – use of money as a yardstick for comparing the values of goods and services in relation to one another. Store of Value – use of money to store purchasing power for later use. Banking Interest Rate – amount of money the borrower must pay for the use of someone else’s money. Expressed in a percentage. Prime Rate – rate of Interest banks charge on loans to their best business customers. Loans – money that is given with the idea that it will be paid in return. Collateral – something of value that a borrower lets the lender claim if a loan is not repaid. Credit Unions – depository institution owned & operated by its members to provide savings accounts & low interest loans to its members. Savings & Loans – depository institution that, like a commercial bank, accepts deposits & lends money.

3. FEDERAL RESERVE Federal Reserve (FED) – created by Congress in 1913 to “provide for a safer and more flexible banking and monetary system.” FED – 12 Districts – each served by one bank, divided into territories. FED decisions do not have to be ratified by President or Congress. Appointments to the Board of Governors – President appoints – Congress approves. FED reports to Congress on its policies. Purpose of the FED – control nation’s money supply. Tight Monetary Policy – makes credit expensive and in short supply in an effort to slow the economy. (inflation) Loose Monetary Policy – makes credit inexpensive & abundant, to increase money in circulation. (recession) Goal of the FED – balance the need to create long-term growth in the economy – more jobs, consumer goods, continuing higher standard of living – with the need to avoid inflation (higher prices). Tools of the Federal Reserve 1.Discount Rate – the amount of interest that commercial banks pay the FED for borrowed funds. Banks in turn set their lending rates for companies, individuals, home mortgages, and auto loans. 2.Reserve Requirement – the amount of money banks must hold as security for loans. The higher the requirement, the less money banks have to loan. (expressed in a %) 3.Buying & Selling Government Securities – bonds and loans the government has received from private individuals and banks.

4. Managing Your Money Types of Income Disposable Income – Money left over after taxes. Discretionary Income – Money left after paying for necessities. Consumer Rights Consumerism – a movement to educate buyers about the purchases they make & demand better & safer products. Caveat Emptor – “let the buyer beware” Consumer Bill of Rights 1)Right to a Safe Product. Will not harm health or lives. 2)Right to be Informed. Must not be misled by producer. 3)Right to Choose. Have a variety of products available. 4)Right to be Heard. Consumer interests heard in writing laws. 5)Right to Redress. Payment for damages from producer. Consumer Responsibilities 1)Gather Information before you buy. 2)Report Faulty Products. 3)Make Fair Complaints.

5. Planning & Budgeting Understanding a Budget Budget – a record of what you earn & spend. Income – the money you earn. Expenses – money you spend on everything including saving. Understanding Credit Credit – borrowing money to pay for something now, promise to pay back later. Lender – person who lends money. Borrower – person receiving the loan. Interest – the cost for the use of the money. APR – (annual percentage rate) – expressed as a %. Credit Rating – evaluation of your ability to pay back a loan. Collateral – property or other items of value that are used as a backup for a loan. Can be seized if you default. Sources of Credit 1) Banks2) Credit Unions3) Financial Institutions

6. SAVING & INVESTING Investment – using money to earn money later. Financial System – made up of savers and borrowers Financial Intermediary – takes transactions between savers and borrowers. Financial Intermediaries savings & loan associations financial company mutual fund life insurance company pension fund Saving & Investing Vocabulary portfolio – collection of financial assets prospectus – investment report intermediaries give to clients liquidity – the ease with which investment can be turned to cash return - $ above the original investment diversification – investing in different types of businesses, etc… (spreading out to reduce risk) Interest Rates CD – certificate of deposit Higher rate because bank Holds $ longer Interest rates based on length of loan & risk

7. BONDS & OTHER FINANCIAL ASSETS Bond – a loan to a company, government, etc… (low risk investment) 3 Components of a Bond coupon/interest rate maturity – time payment due par value – amount to purchase Types of Bonds Savings bond Treasury bond Treasury bill Treasury note Municipal bond Corporate bond Junk bond

8. THE STOCK MARKET Stock Market Vocabulary Share/equity – portion of company Dividend – profit from stock Capital gain/loss – increase/decrease in amount of investment Stock split – cuts price of stock in ½; doubles shares Stockholder – owner of shares of stock Stock brokerage – firm that buys/sells stock Stock exchange – stock is bought and sold Stock Exchanges NYSE - largest – biggest companies listed AMEX – smaller companies OTC – electronic trading NASDAQ – market for OTC Stock Market Analysis Bull Market – on the rise Bear Market – on the decline Dow Jones Industrial Average 30 companies from different sectors; overall health of the market S&P 500 – 500 companies, mainly NYSE

9. How to Read a Stock Table 7 - latest CP/latest net earning 8 - shares traded that day (in 100s) 9 - that day’s high price 10 - that day’s low price 11 - closing price 12 - difference btwn current CP and previous CP 1 - high price for past year 2 - low price for past year 3 - company name 4 - stock symbol 5 - last annual dividend/share 6 - dividend/closing price (per share)