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