Introduction to Finance

Currency appreciation
Occurs 
when 
there 
is an increase in a currency’s value
Currency depreciation
Occurs when there 
is a decrease in a currency’s value
Currency exchange markets (foreign 
exchange markets)
Electronic markets where 
banks and institutional traders buy and sell cur-
rencies on behalf of businesses, other clients, 
and themselves
Currency exchange rate
Value of one cur-
rency relative to another currency
Currency exchange rate risk
The price risk 
associated with fl uctuating exchange rates over 
time
Current account
Shows the fl ow of income 
into and out ofthe United States during a spec-
ifi ed period
Current assets
Cash and all other assets that 
are expected to be converted into cash within 
one year
Dealer
Satisfi es the investor’s trades by 
buying and selling securities from his or her 
own inventory
Dealer system
Composed of a closely linked 
network of dealers and brokers in government 
securities with an eff ective marketing network 
throughout the United States 
Debenture bonds
Unsecured obligations 
that depend on the general credit strength of 
the corporation for their security
Debit cards
Provide for the immediate direct 
transfer of deposit amounts
Debt management
Includes determining 
the types of refunding to carry out, the types 
of securities to sell, the interest rate patterns 
to use, and decisions to make on callable 
issues
Debt securities
Obligations to repay bor-
rowed funds
Debt securities markets
Where money 
market securities, bonds (corpo rate, fi nancial 
institution, and government), and mortgages 
are originated and traded
Default risk
Risk that a borrower will not 
pay interest and/or repay the principal on a 
loan or other debt instrument according to the 
agreed contractual terms