FBLA Banking and Financial Systems
banking - answer The issuing, exchanging, loaning, and custody of money and the
extension of credit.
payer - answer The person who writes a check.
2-for-1 stock split - answer When each stockholder receives an additional share for
each share held, but the value of each share is reduced by half: two shares now equal
the original value of one share before the split.
3-for-2 stock split - answer When each stockholder receives an additional share for
every two shares held, but the value of each share is reduced by 2/3: three shares now
equal the original value of two shares before the split.
credit card - answerA card issued by a financial company giving the holder an option to
borrow funds, usually at point of sale. They have higher interest rates (around 19% per
year) and are primarily used for short-term financing. Interest usually begins one month
after a purchase is made and borrowing limits are pre-set according to the individual's
credit rating.
One of the most popular and widely accepted forms of payment for consumer goods
and services in the U.S.
debit card - answerAn electronic card issued by a bank which allows bank clients
access to their account to withdraw cash or pay for goods and services. This form of
payment also removes the need for checks as it immediately transfers money from the
client's account to the business account.
The major benefits to this type of card are convenience and security.
Securities Investor Protection Corporation - answerInsures investors accounts for up to
$500,000 (including $100,00 in cash), in the event of fraud or the bankruptcy of a
member securities brokerage.
add-on clause - answerProvision contained in an installment contract. An add-on clause
creates a security interest in the earlier goods until full payment is made on the new
goods. By this clause, the earlier purchases serve as the security for new purchases.
false - answerTrue or false? Purchasers of automobile liability insurance can reduce
their premium costs by agreeing to a deductible.
liquid assets - answerAssets that are easily convertible to cash, such as those in
savings accounts, stocks, and US savings bonds.
,higher interest rates - answerA tight money policy followed by the Federal Reserve
would most likely result in:
renewable term life insurance - answerBest for short-term life insurance. Policies that
start out with low premiums, but increases each time the term is renewed. Policyholders
are guaranteed renewal for succeeding terms even if they have a serious illness.
Truth in Lending Act - answerLenders are required to disclose the true costs of credit to
borrowers, including the total amount of interest charged over the life of a loan and the
amounts of monthly payments by this federal law:
escrow - answerWhen real estate agents have the bank collect money from buyers and
put it into the seller's account, they are using the bank's _____ services.
municipal bonds - answerBonds issued by a local government, or its agencies. Most
likely would have the lowest interest rate.
balance sheet - answerA financial statement that shows the firm's assets and liabilities.
property damage liability - answerInsurance coverage that pays for the damages to the
car and possessions (including stationery objects such as trees/mailboxes) of the other
party in an accident that is your fault.
comprehensive physical damage - answerInsurance coverage that covers the cost of
damages to your car caused by natural disasters, fire, robbery, theft, vandalism, and
more.
personal injury protection - answerInsurance coverage that covers medical expenses,
although it depends based on plan/provider, usually it covers most medical costs,
hospital costs, Income continuation, lost wages and funeral costs.
price-to-earnings ratio - answerRatios that relate a stock's price to the firm's profits, thus
allowing investors to evaluate stock prices.
mutual company - answerA type of insurance company that returns part of the profits of
the company to its policyholders.
independent agency - answerCreated by Congress to address concerns that go beyond
the scope of ordinary legislation.
passbook accounts - answerAnother way of saying "savings accounts."
credit unions - answerDepositors are the owners of ______.
prime rate - answerInterest rate charged by banks to their best corporate borrowers.
, whole life insurance - answerLife insurance policy that remains in force for the insured's
whole life. Advantage = cash values can build up that policy holders can borrow against
later.
teller - answerAn entry-level position at a financial institution.
euro - answerA new currency used by members of the European union.
commercial bank - answerPrimary lending function is to help business owners who want
to expand.
suitability - answerAn important element in determining proper business practices.
Financial professionals recommend financial products based on the client's financial,
social, and emotional circumstances.
defensive stocks - answerThose likely to have share prices that are more volatile that
those of growth stocks. Most popular when economic outlook is not very positive.
trust department - answerThis part of a bank would be most likely to manage money for
a 12-year-old who received an inheritance.
cashier's check - answerA check drawn on the bank's own funds, often requested by
seller to be assured of payment.
M1 - answerThe narrowest definition of the money supply. Includes currency, travelers'
checks, and balances in checking accounts.
fractional reserve banking - answerA certain percentage of any deposit that is placed in
the vault while the remainder is lent out/invested by the bank.
junk bonds - answerA colloquial term for a high-yield or non-investment grade bond.
Junk bonds are fixed-income instruments so called because of their higher risk.
However, they have speculative appeal because they offer much higher yields than
safer bonds. Companies that issue junk bonds typically have less-than-stellar credit
ratings, and investors demand these higher yields as compensation for the risk of
investing in them. A junk bond issued from a company that manages to have its credit
rating upgraded will generally have a substantial price appreciation.
bond rating - answerA grade given to bonds that indicates their credit quality. Private
independent rating services such as Standard & Poor's, Moody's and Fitch provide
these evaluations of a bond issuer's financial strength, or its the ability to pay a bond's
principal and interest in a timely fashion.
AAA and AA - answerHighest bond rating; high credit-quality investment grade.
AA and BBB - answerMedium credit-quality investment grade
banking - answer The issuing, exchanging, loaning, and custody of money and the
extension of credit.
payer - answer The person who writes a check.
2-for-1 stock split - answer When each stockholder receives an additional share for
each share held, but the value of each share is reduced by half: two shares now equal
the original value of one share before the split.
3-for-2 stock split - answer When each stockholder receives an additional share for
every two shares held, but the value of each share is reduced by 2/3: three shares now
equal the original value of two shares before the split.
credit card - answerA card issued by a financial company giving the holder an option to
borrow funds, usually at point of sale. They have higher interest rates (around 19% per
year) and are primarily used for short-term financing. Interest usually begins one month
after a purchase is made and borrowing limits are pre-set according to the individual's
credit rating.
One of the most popular and widely accepted forms of payment for consumer goods
and services in the U.S.
debit card - answerAn electronic card issued by a bank which allows bank clients
access to their account to withdraw cash or pay for goods and services. This form of
payment also removes the need for checks as it immediately transfers money from the
client's account to the business account.
The major benefits to this type of card are convenience and security.
Securities Investor Protection Corporation - answerInsures investors accounts for up to
$500,000 (including $100,00 in cash), in the event of fraud or the bankruptcy of a
member securities brokerage.
add-on clause - answerProvision contained in an installment contract. An add-on clause
creates a security interest in the earlier goods until full payment is made on the new
goods. By this clause, the earlier purchases serve as the security for new purchases.
false - answerTrue or false? Purchasers of automobile liability insurance can reduce
their premium costs by agreeing to a deductible.
liquid assets - answerAssets that are easily convertible to cash, such as those in
savings accounts, stocks, and US savings bonds.
,higher interest rates - answerA tight money policy followed by the Federal Reserve
would most likely result in:
renewable term life insurance - answerBest for short-term life insurance. Policies that
start out with low premiums, but increases each time the term is renewed. Policyholders
are guaranteed renewal for succeeding terms even if they have a serious illness.
Truth in Lending Act - answerLenders are required to disclose the true costs of credit to
borrowers, including the total amount of interest charged over the life of a loan and the
amounts of monthly payments by this federal law:
escrow - answerWhen real estate agents have the bank collect money from buyers and
put it into the seller's account, they are using the bank's _____ services.
municipal bonds - answerBonds issued by a local government, or its agencies. Most
likely would have the lowest interest rate.
balance sheet - answerA financial statement that shows the firm's assets and liabilities.
property damage liability - answerInsurance coverage that pays for the damages to the
car and possessions (including stationery objects such as trees/mailboxes) of the other
party in an accident that is your fault.
comprehensive physical damage - answerInsurance coverage that covers the cost of
damages to your car caused by natural disasters, fire, robbery, theft, vandalism, and
more.
personal injury protection - answerInsurance coverage that covers medical expenses,
although it depends based on plan/provider, usually it covers most medical costs,
hospital costs, Income continuation, lost wages and funeral costs.
price-to-earnings ratio - answerRatios that relate a stock's price to the firm's profits, thus
allowing investors to evaluate stock prices.
mutual company - answerA type of insurance company that returns part of the profits of
the company to its policyholders.
independent agency - answerCreated by Congress to address concerns that go beyond
the scope of ordinary legislation.
passbook accounts - answerAnother way of saying "savings accounts."
credit unions - answerDepositors are the owners of ______.
prime rate - answerInterest rate charged by banks to their best corporate borrowers.
, whole life insurance - answerLife insurance policy that remains in force for the insured's
whole life. Advantage = cash values can build up that policy holders can borrow against
later.
teller - answerAn entry-level position at a financial institution.
euro - answerA new currency used by members of the European union.
commercial bank - answerPrimary lending function is to help business owners who want
to expand.
suitability - answerAn important element in determining proper business practices.
Financial professionals recommend financial products based on the client's financial,
social, and emotional circumstances.
defensive stocks - answerThose likely to have share prices that are more volatile that
those of growth stocks. Most popular when economic outlook is not very positive.
trust department - answerThis part of a bank would be most likely to manage money for
a 12-year-old who received an inheritance.
cashier's check - answerA check drawn on the bank's own funds, often requested by
seller to be assured of payment.
M1 - answerThe narrowest definition of the money supply. Includes currency, travelers'
checks, and balances in checking accounts.
fractional reserve banking - answerA certain percentage of any deposit that is placed in
the vault while the remainder is lent out/invested by the bank.
junk bonds - answerA colloquial term for a high-yield or non-investment grade bond.
Junk bonds are fixed-income instruments so called because of their higher risk.
However, they have speculative appeal because they offer much higher yields than
safer bonds. Companies that issue junk bonds typically have less-than-stellar credit
ratings, and investors demand these higher yields as compensation for the risk of
investing in them. A junk bond issued from a company that manages to have its credit
rating upgraded will generally have a substantial price appreciation.
bond rating - answerA grade given to bonds that indicates their credit quality. Private
independent rating services such as Standard & Poor's, Moody's and Fitch provide
these evaluations of a bond issuer's financial strength, or its the ability to pay a bond's
principal and interest in a timely fashion.
AAA and AA - answerHighest bond rating; high credit-quality investment grade.
AA and BBB - answerMedium credit-quality investment grade
