Review #2:What Are the Components of M-1 and M-2?
Chapter 15
Review #2:What are the components of M-1 and M-2?
M-1 is the most basic measure of money. It includes cash, checks, and the balance of checking accounts. M-2 includes M-1 funds as well as other non-liquid forms such as time deposits, money market funds, and savings accounts.
Review #4:Describe the structure of the Federal Reserve System.
The first part of the Fed is the board of governors, which is responsible for controlling the nation’s money and advising the President on economic issues. The reserve banks hold reserve deposits. The open market committee also forms economic policies. The member banks are banks throughout the country that are FDIC-insured.
Analysis #8: Customers who deposit their money in online-only checking and savings accounts can often get higher interest rates than at brick-and-mortar banks. Why do you think that online banks can offer these rates? What might be some drawbacks to online-only banking?
Online-only banks can offer these better rates because they themselves encounter fewer fees as they’re using electronic systems and not participating in physical banking networks. Drawbacks include the inability to go to a local branch to resolve problems, and online-only banks usually offer fewer options in terms of types of accounts.
Chapter 16
Review #1:Explain the concept of the time value of money.
The concept of time value of money emphasizes the fact that while money is invested it is grows itself through interest or other returning yields.
Review #2: What do mutual funds and exchange-traded funds offer, and how do they work?
They offer a form of investment that does not require as much starting capital as some other investments do. It’s also easy to open up these funds, and almost anyone can do so simply online. Mutual funds are priced once daily and can be invested in, while ETFs (as their name suggests) are traded on an exchange and are priced continuously.
Review #3:Identify the various characteristics of corporate bonds.
A corporate bond allows a corporation to raise capital by receiving a sum of money from the bondholder and paying both interest on that bond over time and the value of the bond at its date of maturity. A bond is defined in its indenture, which details when it must be paid back (matures) for its face value.
Review #5:How do firms meet their needs through debt financing and equity financing?
Firms can raise capital through debt financing, in which they receive loans from outside sources. They can also meet their capital needs through equity financing, in which they issues shares of their company or rely on retained earnings.