Chapter 11 Section 1By: Maddie Borgman

InvestingDefinition: The act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit

-Promotes economic growth and contributes to a nations wealth-Can’t take place in an economy without a financial system-Central part of the free enterprise system which allows people to make profit

Financial SystemDefinition: Includes savers and borrowers and allows the transfer of money between them to take place

-When people save they are essentially lending funds to others

-”Savers” receive documents of confirmation after depositing or purchasing where claims on the property or income of the borrower are represented

-Those “claims” are also know as financial assets

Financial IntermediariesDefinition: Institutions that help channel funds from

savers to borrowers

Includes:-Banks, savings and loan associations: Take in deposits from savers then lend funds to businesses

-Finance companies: Make loans to consumers and small businesses

-Mutual funds: Let people invest in a variety of companies in the stock market

-Life insurance companies: Financial protection for families or other s insured

-Pension funds: Income retired people receive afterworking a certain number of years

Risk, Liquidity, and ReturnReturn and Liquidity:

-If you save in a savings account you can get your money whenever (liquid)-savings accounts have low interest rates (low return)

Return and Risk:-Buying a certificate of deposit is considered a safe investment because it is insured by the government-Buying a C.D. gives up liquidity for some time but you wont loose money -The higher the potential return the riskier the investment

Words of wisdom…http://www.youtube.com/watch?v=1AhYev-0ERo&feature=related

Questions:1) What promotes economic growth and contributes to a nations wealth?

2) Can Investing take place in an economy without a financial system?

3) What includes savers and borrowers and allows the transfer of money between them to take place?

4)Does financial intermediaries include mutual funds?

5) Do savings accounts pay relatively low interest rates?