Which of the following is not a liquid asset?

1. Which of the following is not a liquid asset? Cash Check Debit card house

2. warmup Why does the US dollar have such a good value?

3. Warmup—Where do the billionaires live?

4. Money Chapter 10

5. Understanding Money Chapter 10 Section 1 SSEMI1b Explain the role of money as a medium of exchange and how it facilitates exchange.

6. What is Money? • Use of money is a social custom • Its role is to facilitate exchange • Money itself is any asset accepted as paymentfor goods or services • Without money we would barter like traditional societies • Although barter works it can be complex and inefficient

7. Functions of Money Medium of Exchange: commonly accepted payment Unit of Account: standardized and easily measured Store of Value: holds purchasing power over time

9. Warmup What are the 6 characteristics of money?

10. Warmup—Write the question and answers On the island of Yap, large circular stones are used for money. The main reason why this type of money serves its function as a medium of exchange is because it is A very portable B highly divisible C accepted as payment D prized in foreign transactions

11. Barter http://www.youtube.com/watch?v=J7hNOt2Y0J8 National Geographic – Inside America’s Money Vault http://www.youtube.com/watch?v=WmVGYLTROnQ

12. Characteristics of Money Durable—lasts for an extended period Portable—easy to carry & exchange Divisible—easily broken into measurable units Uniform—similar in appearance and has a standard value Scarce—Not overly printed or in too great abundance Accepted—Society is certain that it has value

13. Types of Money • Fiat—has value because the government says so • “legal tender” • Representative— stands in for money • IOU, silver certificate • Commodity—has other uses besides acting as money • Tobacco, water

14. How Much Money is Out There? • Money supplyall the money available in the economy • This includes money in and out of banks • Liquidity refers to how easily an asset can be turned into cash • Federal Reserve tracks the amount of money “in circulation” or in the economy

15. What if We Redesigned the Dollar?

19. What Images Are Important?

21. Should We Just Use Presidents?

22. General Banking and Finance Chapter 10 Section 3

23. Finance • The Financial System—various markets, players and institutions that coordinate the channeling of funds between borrowers and savers • Borrowers—demand money from the system with the knowledge that they will have to pay it back with interest • Savers—supply money to the system with the expectation that it will be paid back to them with interest

24. Banks and Institutions • Investment Banks—raise money for companies (perhaps even nations) and manage wealth of private investors (merchant bank) • JPMorgan, Goldman Sachs • Credit Unions—cooperative lending for specific groups • Marshland, Teachers • Commercial Banks—offer a wide range of lending services to the public (retail bank) • Bank of America, United Community

25. Functions of a Bank • Banks serve several purposes: • Store Money—safe and insured • Vehicle for Saving— variety of accounts available • Loans—renting money at a cost • Credit—form of deferred payment • Principal is amount owed • Interest is cost of renting the principal

26. FDIC preserves and promotes public confidence in the U.S. financial system by • insuring depositors • identifying, monitoring and addressing risks to the deposit insurance funds • limiting the effect on the economy and the financial system when a bank or thrift institution fails

27. Which of the following is primarilyresponsible for the control of the money supply?A the United States TreasuryB the Federal Reserve SystemC the Federal Deposit InsuranceCorporationD the Comptroller of the Currency

28. Understanding Financial Markets and Their Components Chapter 11 Section 1 “A [financial] market is an aggregation of what people think the future is going to be like.” ~ Dan Mathisson

30. Financial Markets • When a saver, or investor, makes a purchase on the financial market they gain a financial asset • AKA securities, these are claims on a borrower’s repayments and potential interest • Most investors will not meet borrowers, they will move through an intermediary • These are companies and institutions that offer financial products

31. Diversify Your Bonds! • Dealing with intermediaries offers 3 advantages: • Sharing of risk • institutions can diversify, or spread, an investors money out into multiple investments to reduce risk • Access to information • Managers and companies provide portfolios and prospectuses that explain companies’ profits, losses, products, etc. • Liquidity • Banks can offer a guaranteed return, or money back above what was invested—something more secure than giving money to a friend

32. Investing • Investing generally refers to the use of resources or assets to earn income or profit in the future • There are many vehicles, or instruments, for investment such as property, stocks or bonds, savings, etc. • Investing happens over the short or long term • Investors look for “return” or the ratio of money gained to lost when searching for or evaluating opportunities

33. Time to Stock Up! • Stock is a claim on part of a company’s earnings as ownership • They are sold in shares, or portions (AKA equities) • Owning stock yields a profit 2 ways: • Dividends—a portion of a company’s profits paid to investors during the year • Capital gains—to sell a stock for more than the price for which it was purchased

34. How Do I Buy Stock? • Stock is purchased on a stock exchange • a financial market • An individual opens an an account with a brokerage firm and can purchase stock online • Those trades are executed on the “floor” of a physical market • NYSE is America’s oldest and largest and located on Wall Street, NYC

35. Trading • Markets generally fluctuate constantly throughout a year or even a day • When stock prices steadily rise it is called a bull market;steady fall is a bear market • These prices are listed on many different indices: • NASDAQ—favors tech companies • S&P 500—tracks 500 companies (more diverse) • DJIA—30 largest American companies (Dow)

36. Financial Assets—Bonds • Another common asset is a bond—an IOU • Investors loan money to a corporation or government and are repaid, with interest, over a period of time • When full payment is due back to the investor, the bond has matured • How much the bond would pay if held to maturity is its yield

37. Markets—Where’s the Money? • These and other complex financial products are traded on financial markets • Capital Markets offer lending for over a year • Money Markets offer lending for less than year • Primary markets allow on the original buyer to redeem payment • Secondary markets allow the asset to be resold

38. Eric received a $2,000 bonus from his employer. He deposited the entire amount in a one-year certificate of deposit with a simple interest rate of 5%. When the CD matured, how much interest had Eric earned? A $10 B $20 C $50 D $100