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average number of credit cards per person

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9

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number of houses that file for bankruptcy

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1 in every 35

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A yearly rate of interest that includes fees and costs paid to acquire the loan.The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans

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Annual Percentage Rate

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the process of moving an unpaid credit card debt from one issuer to another.

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Balance transfer

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a charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the

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Cash Advance fee

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the charge for using a credit card, compromised of interest and other fees

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Finance Charge

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If the credit card user does not carry a balance, it is the interest-free time a lender allows between the transaction date and the billing date. It is usually between 20 and 30 days. People who carry a balance on their credit cards have none, it is only for people who pay in full every month

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Grace Period

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The amount a cardholder can pay to keep the account from going into default. Some card issuers will set a high one if they are uncertain of the cardholder's ability to pay.

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Minimum Payment

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a fee charged for exceeding the credit limit on the card

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Over the limit fee

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when you don't make your payments on time, you receive this

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Default rate

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number of account in the category for which payments are past due

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Delinquent

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number of accounts in the category that negatively impact your credit rating

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deragatory

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a credit card offer with this means that a potential customer has passed a preliminary credit-information screening. You pass this just by being a human being

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pre-approved

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save money and live within your budget

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Private scholarships, cook v. eating out, live with roommates v. living alone, get a job, loans for school

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If I don't have credit, I'll never have anything, or, if I have credit, I can have everything

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myth 1

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I don't need to worry about my high balances because I pay my minimum payments every month

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myth 2

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my credit card company is taking advantage of me by charging 18 percent interest

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myth 3

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my lender wouldn't have approved the loan if I couldn't afford it

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myth 4

question

If I co-sign on a loan, the lender will never come after me

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myth 5

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taking a cash advance to keep from falling behind on my payments is a good idea

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myth 6

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Credit card, debit card... what's the difference? Credit cards give the ability to complain effectively.

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myth 7

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consequences

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damaged credit rating, withheld federal treasury payments, garnishment of wages, lawsuits, no additional financial aid, professional licenses in jeopardy

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Use computerized account to manage money like:

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Microsoft money or Quicken

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ways to save

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Certificates of deposit, IRAs, Stock Market, U.S. savings bonds, money market accounts

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Credit reporting agencies

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equifax.com, transunion.com, experian.com

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Asking a federal court to declare that you are unable to pay your debts, debts will be reduced or eliminated, collection activities will stop

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Bankruptcy

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Cons of bankruptcy

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stays on credit for 10 years, affects ability to get a job, student loans are generally not discharged through bankruptcy

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Chapter 7

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no steady income and few assets, debts are cancelled, assets are converted to cash and used to repay part of your debts

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Chapter 13

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have a steady income, are placed under a repayment plan where they pay some or all debt in 3 to 5 years, assets are not sold

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provides one free report every year through a centralized source

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FACT act

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website you obtain information from the FACT act on

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annualcreditreport.com

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what is not in a credit report

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income, ethnicity, mother's maiden name, health information, credit scores

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Automated risk scores

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Vantage and FICO (300-850)

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types of bank accounts

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Checking, savings, money markets, basic checking accounts

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the group of institutions in the economy that help to match one person's savings with another person's investment

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financial system

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financial institutions through which savers can directly provide funds to borrowers

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financial markets

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a certificate of indebtedness

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bond

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the time at which the loan will be repaid

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date of maturity

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the original amount borrowed

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principal

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the length of time until the bond matures

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term

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a British bond that never matures. It pays interest forever, but the principal is never repaid

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perpetuity

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the probability that the borrower will fail to pay some of the interest or principal

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credit risk

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the failure to pay interest or principal

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default

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bonds issued by shaky corporations that pay very high interest rates

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junk bonds

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the way in which the tax laws treat the interest on the bond

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tax treatment

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state and local bonds that do not require one to pay federal income tax on the interest income

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municipal bonds

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high risk

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high return

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a claim to partial ownership in a firm, thus a claim to the profits that the firm makes

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stock

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the sale of stock to raise money

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equity finance

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the sale of bonds to raise money

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debt finance

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the most important stock exchanges in the U.S. economy

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NYSE, the American Stock Exchange, and NASDAQ

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stocks offer:

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higher risk and higher returns

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the computed average of a group of stock prices.

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stock index

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most famous stock indexes

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Dow Jones international average, Standard and Poor's 500 index

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Most newspaper stock tables provide:

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Price of a share, number of shares sold, profits paid to stockholders (dividend), price-earnings ratio

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financial institutions through which savers can indirectly provide funds to borrowers

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Financial intermediaries

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an item that people can easily use to engage in transactions

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Medium of exchange

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an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

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Mutual fund

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mutual funds that buy all the stocks in a given stock index

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Index funds

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a dislike of uncertainty

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risk aversion

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a regular income every year until you die

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annuity

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a high risk person is more likely to apply for insurance than a low risk person because a high risk person would benefit more from insurance protection

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adverse selection

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after people buy insurance, they have less incentive to be careful about their risky behavior because the insurance company will cover much of the resulting losses

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moral hazard

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the reduction of risk achieved by replacing a single risk with a larger number of smaller, unrelated risks. It CANNOT remove aggregate risk

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Diversification

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a measure of the volatility of a variable

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standard deviation

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the risk that effects only a single person. The uncertainty associated with specific companies

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Firm specific risk

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risk that affects all companies in the stock market

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Market risk

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people can reduce risk by accepting a

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lower rate of returns

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the price of the stock is less than the value

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undervalued

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the price of the stock is more than the value

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overvalued

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the price and the value are equal

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fairly valued

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the study of a company's accounting statements to determine its value

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Fundamental analysis

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the price of an asset rises above what appears to be its fundamental value

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speculative bubble

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the theory that asset prices reflect all publicly available information about the value of an asset. (Why insider trading is illegal)

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Efficient markets hypothesis

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When a market reflects all available information in a rational way. If markets are efficient, the only thing an investor can do is buy a diversified portfolio

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Informationally efficient

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the path of a variable whose changes are impossible to predict. Why a monkey can chose better stock than you.

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Random Walk

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Mutual funds allow:

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people with small amounts of money to easily diversify, are professionally managed, have specific objectives

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Allows you to contribute up to 4,000 a year, keep more of your money, invest for your future

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IRA

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ROTH IRA

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Pay taxes on the money now, won't pay taxes later, withdraw contributions at any time

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Traditional IRA

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You need tax deduction right now or anticipate paying taxes at a lower rate when you retire

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prices are on the rise

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Bull Market

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prices are falling

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Bear Market

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long period of economic decline

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Depression

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a measure of stock market prices, based on 30 leading companies on the NYSE

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Dow Jones Industrial Average

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increase in overall prices

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Inflation

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money paid for the use of money

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Interest

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a mild decrease in economic activity

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Recession

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a person's subjective measure of well-being or satisfaction

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Utility

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the profits paid to stockholders by corporations

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Dividend

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profits not paid to stockholders that are used by the corporation for additional investment

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retained earnings

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the dividend expressed as a percentage of the stock's price

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Dividend yield

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the company's total earnings divided by the number of shares of stock outstanding

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Earnings per share

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the price of a corporation's stock divided by the amount the corporation earned per share over the past year. A high P/E indicates that a corporation's stock is expensive relative to its recent earnings ; this might indicate either that people expect earnings to rise in the future or that stock is overvalued

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Price-earnings ratio or P/E

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a selection of various types of stocks, bonds, or both stocks and bonds

answer

Portfolio

Economics Credit Card and Market – Flashcards

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