Financial Literacy Study Guide: Personal Finance, Business Cycle, and Investments - Prof. , Study notes of Business Finance

Download Financial Literacy Study Guide: Personal Finance, Business Cycle, and Investments - Prof. and more Study notes Business Finance in PDF only on Docsity! Study Guide HFDS 238 Dow Jones Close May 3: 12,807.51 May 4: 12,723.58 Financial literacy - your knowledge of facts, concepts, principles, and technological tools that are fundamental to being smart about money. Personal Finance – the study of personal and family resources considered important in achieving financial success; it involves how people spend, save, protect, and invest their financial resources. Financial Responsibility – your are accountable for your future financial well-being and that you strive to make good decisions in personal finance Financial Success- achievement of financial aspirations that are desired, planned, or attempted Business Cycle- a process by which the economy grows and contracts over time Financial Planning- the process of developing and implementing a coordinated series of financial plans Financial Goals- the specific long, intermediate, and short term objectives to be attained through financial planning and management efforts Financial Strategies- pre-established plans of action to be implemented in specific situations. Balance Sheet (net worth statement)- describes an individual’s or family’s financial condition on a specified date by showing assets, liabilities, and net worth. Cash-flow Statement- lists and summarizes income and expense transactions that have taken place over a specific period of time, such as a month or year. Fair Market Value- what a willing buyer would pay a willing seller Liquid Assets- easily converted to cash  Cash  Checking/savings account  Savings bonds, CODs, money market accounts Tangible Assets- personal property used to maintain your everyday lifestyle  Automobiles, boats  House, condo  Appliances  Jewelry, tools Investment Assets- include tangible and intangible items acquired for monetary benefits  Stocks, bonds, gold, IRAs  Life insurance  Real property Short-term liabilities- paid off within one year  Personal loans owed to others  Credit charges  Utility bills, insurance premiums Long-Term- debt comes due in more than one year  Automobile loans  Mortgages  Education loans Fixed Expense- paid in the same amount during each time period  Retirement contributions  Housing  Automobile Variable Expense  Meals  Utilities  Gas Disposable Income- amount of income remaining after taxes and withholding Discretionary Income- money left over after necessities such as housing and food are paid CPI- market basket of goods and services from CES, measure changes in prices and, therefore, inflation Credit  Secured- a line of credit that is backed with collateral such as cash or other assets  Unsecured- No collateral, promise to repay Credit Ratio- .15 - .18 of disposable income Credit Bureaus- Equifax, Transunion, Experian FICO score- 35% Payment history, 30% amounts owed, credit history 15%, Card Act of 2009- no interest rate increases, no over limit fees, no one under 21 w/o parent or job Protection  Debit Cards- Electronic Funds Transfer Act  Equal Credit Opportunity Act prohibits discrimination  Fair Credit Reporting Act ensure confidentiality, accuracy, consumers right to know  Fair Credit Billing Act to correct mistake and errors  Fair Debt Collections Act prevent unfair debt collector practices  Fair and Accurate Credit Transactions Act: FTC, FRAUD Loans  Subsidized- Based on need, gov’t pays interest  Unsubsidized- NOT based on need, borrower responsible for interest Hope tax credit- $1800 per student Bankruptcy  Chapter 7- provides for the liquidation of assets with proceeds applied to paying off excusable debts to the degree possible  Chapter 13- designed for individuals with regular incomes who might be able to pay off some or all of their debts given certain court protections Savings  Checking accts  Money Markets- earn interest, limit withdrawals, min balance required  CD- $ for a fixed term 6 mo - 4 or 5 years, risk and reward, penalty for early withdrawal Laddering of CD (or Bonds)- liquidity, earn highest amount of interest FDIC- insurance of money for up to $250,000 APY- return on total interest received on $100 deposit for 365 day period, given institutions simple annual interest rate and compounding frequency Bonds  Par- multiple of $1000 that is printed on bond when issued  Coupon Rate- interest rate printed on the certificate when the bond is issued  Call- allows issuer to repurchase the bond at par value  Discount- diff between purchase price of T-bill and what Treasury pays you at interest Government Bonds  T-Bill- short term gov’t securities w/ maturities ranging from a few days to 52 weeks  Treasury note (or bond)- fixed-principal, fixed interest rate gov’t security issued for an intermediate or long term. 2, 3, 4, 10, years…pay interest every 6 months  US gov’t savings bonds- nonmarketable, interest bearing bonds issue by Treasury Municipal Government Bonds- long term debts issued by local governments and their agencies Corporate Bonds- interest bearing certificates of long-term debt issued by a corporation Bond Ratings- rated by Moody’s and Standard & Poor’s, AAA being high quality/small risk and down from there alphabetically Junk Bond- a bond rated BB or lower because of its high default risk Zero Coupon Bonds- municipal, corporate, and Treasury bonds that are issued at a sharp discount from face value and pay no annual interest but are redeemed at full face vale upon maturity Yield to Price- Coupon rate $$/price of bond Stocks- ownership, equity