Banking & Credit

Dividend

a sum of money paid regularly

Which nondepository intermediary is essential but not a good investment

Insurance companies because they don't make loans & the cash value of a policy may be used to secure a loan

IPO (Initial Public Offering)

Sharing

Asset

anything of value

Liquid Asset

anything that can be readily be exchanged (example: cash)

Advantages of homeownership

build equity, good investments b/c increase in value, strong credit history, significant tax reductions

List 2 ways access to capital helps the economy grow

businesses are expanded & jobs are created b/c of bank funding

Liability

cash obligation

Wholesale banks

commercial banks that specializes only in business banking

Spread (net interest income)

difference between what a bank pays in interest and what it receives in interest

Nondepository intermediaries

doesn't take deposits & earns money by selling services (examples: insurance companies & pension funds)

Direct deposit

electronic transfer of a payment directly from the account of the payer to the recipient's account

List 4 functions that banks perform

safeguard, transfer, lending, exchange

Difference between credit union & commercial banks

1. Credit Union is only offered to members, while commercial banks is open to the public 2. Credit Union is not-for-profit, Commercial banks is for-profit

Name 5 types of technological innovations in banking

ATMs, online banking, smart cards, mobile banking, payroll cards

Why are bank's deposits not a source of income?

Bank's deposits are not a source of income because the deposit is money owed by the bank to the depositors

Reverse Mortgages

Mortgages for seniors to utilize equity by receiving payments based on the value of their equity

Depositors

People who put money into banks

What is PMI & why do we have it?

Private Mortgage Insurance is a mortgage insurance used with conventional loans. It protects the lender - not you—if you stop making payments on your loan. PMI is arranged by the lender and provided by private insurance companies.

Depository intermediaries

get funds from the public and use them to finance their business

Name 3 trends in recent banking history

increases in mergers, newer technology, increased competition

Home equity loan

loan in which the borrower uses the equity of his or her home, used in house repairs/medical bills/college education, TAX REDUCTION

What are bank's assets

loans, mortgages, cash

Banks liabilities are more liquid than assets because

longer term loans

Name 2 types of thrift institutions

mutual saving banks and savings and loans

Principle in a loan

original amount you borrowed

Currency Exchange

private companies that cashes checks, sells money orders or other exchanges services

Underwater mortgage

when the balance of the mortgage loan is higher than the fair market value of the property