Introduction to Finance

Positive correlation
When asset returns 
move together over time
Pre-authorized checks
Regular (typically 
monthly) deductions by a vendor from a cus-
tomer’s checking account 
Merchandise trade balance
The net diff er-
ence between a country’s import and export of 
goods
Mission statement
Statement of a fi rm’s 
main reason for being; sometimes called a 
vision statement 
Mission, objectives, goals, and strategies 
(MOGS)
A corporate planning tool that aids 
in developing project plans that fi t well with a 
fi rm’s plans
Modifi ed internal rate of return (MIRR) 
method
A technique that solves some of the 
problems presented by IRR. MIRR rankings of 
mutually exclusive projects with comparably 
sized initial investments will agree with the 
npv rankings of those projects
Monetary base (MB)
Banking system 
reserves plus currency held by the public
Monetary policy
Involves regulating the 
growth of the money supply and regulating its 
cost and availability
Monetizing the debt
The Fed buys govern-
ment securities, fi nancing some of the defi -
cit and providing additional reserves to the 
banking system, thus increasing the money 
supply
Money
Anything generally accepted as a 
means of paying for goods, services, and pay-
ing off debts
Money market mutual funds (MMMFs)
Issue shares to customers and invest the pro-
ceeds in highly liquid, short maturity, interest-
bearing debt instruments called money market 
investments
Money market securities
Debt 
instruments 
or securities with maturities of one year or 
less
Money markets
Where debt securities with 
maturities of one year or less are issued and 
traded