Shared Flashcard Set

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study guide
exam 3
41
Finance
Undergraduate 3
12/01/2009

Additional Finance Flashcards

 


 

Cards

Term
what is required by law on a loan disclosure statement?
Definition
APR, total value of all payments, actual loan amount, total finance (interest) costs
Term
acceleration clause
Definition
if you miss a payment the entire loan amount may be due
Term
recourse clause
Definition
what the lender will do if you default i.e. raise the interest rate, court costs
Term
balloon payment
Definition
smaller monthly payments are used but they don't pay off the loan in the time frame resulting in a large final payment
Term
consumer credit
Definition
nonbusiness debt used for nonmortgage expenditures
Term
FICO
Definition
most commonly used credit score named after Fair, Isaac & Co.
Term
good to keep credit charges at what percent of your take home pay
Definition
20% or less
Term
five C's of credit
Definition
character, capacity, capital, collateral, conditions
Term
3 types of consumer credit
Definition
single payment loans, revolving credit, service credit
Term
revolving credit
Definition
credit in advance of transaction, visa, mastercard, amex, etc
Term
service credit
Definition
full payment is not required when services are rendered
Term
teaser rates
Definition
promotional rates (i.e. 0% APR)
Term
default rates
Definition
very high apr's that are assessed whenever certain rules of the account are violated (late payments)
Term
advantages of a credit card
Definition
interest free grace period, record keeping, convenience, available for emergencies
Term
advantage and disadvantage of a credit card
Definition
convenience
Term
usury laws
Definition
state laws governing interest rates, 36% apr in AZ
Term
credit legislation (4)
Definition
equal credit opportunities act, fair credit reporting act, fair credit billing act, consumer credit protection act
Term
equal credit opportunities act
Definition
main purpose is to prohibit discrimination
Term
fair credit reporting act
Definition
30 day deadline for fixing mistakes, creditors must provide accurate info, job applicant's permission needed to run credit check, toll free numbers during business hours, toll free numbers for removing one self from lists used by credit card companies, one free credit report annually
Term
fair credit billing act
Definition
time frames for renewing, disputes, stop payments for defective or missing purchases
Term
consumer credit protection act
Definition
"truth in lending act" accurate disclosure of fees, APR, limited liability of $50 per card
Term
bankruptcy types (3)
Definition
ch. 13, ch. 7, ch. 11
Term
ch. 13 bankruptcy
Definition
"wage earner plan" debt restructure or repayment plan, keep assets, least intense
Term
ch. 7 bankruptcy
Definition
"straight bankruptcy" allows the debtor to start over with a clean slate. certain assets kept, many sold off to satisfy claims.
Term
ch. 11 bankruptcy
Definition
used by high income earners and debt restructure has to be approved by the creditors
Term
derivatives
Definition
an investment that derives its value from the price change of another investment
Term
futures
Definition
contracts that provide for the later delivery of an actual commodity. both buyer and seller are locked in by contract
Term
daily price limit
Definition
maximum allowable price fluctuation for a commodity. there is no daily price limit for a contract during its final month
Term
what percentage of futures traders lose money?
Definition
about 75%
Term
what does a futures contract specify (5)
Definition
1. the product
2. the trading exchange
3. the size of the contract
4. the pricing unit ($/lb, cents/bushel etc)
5. the delivery month
Term
hedger
Definition
short position, suppliers or producers of a product who want to lock in what they believe is the current high price
Term
speculator
Definition
long position, traders who accept the shifting of risk in an attempt to make a profit
Term
what is safer, options or futures
Definition
options
Term
call option
Definition
option to purchase a specified number of shares of common stock for a specified price for a specified period of time.
Term
put option
Definition
option to sell a specified number of shares of common stock for a specified price and for a specified period of time
Term
option holder
Definition
buyer, owner of option, decide if they want to exercise option contract
Term
option writer
Definition
seller
Term
2 ways seller can sell options
Definition
naked: seller doesn't own underlying stock
covered: seller does own underlying stock
Term
option advantages
Definition
leverage, limit risk to no more than original investment
Term
option disadvantages
Definition
short life, no current income
Term
grabbing ass
Definition
chelseas
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