Vocabulary:

default Failure to meet a contractual obligation such as repayment of a loan by a borrower or payment of in­terest to bond holders. In the event of default lenders and bondholders can make claims against the bor­rower or the issuer.

default of Upon default of performance on the part of the customer, the Bank

performance may, at its discretion, realize upon the pledges by formal proceedings or by private sale (General Banking Conditions).

the principal The debtor is expected to repay the principal and the interest.

(of the loan)

lender A lender shouldn't lend money unless he knows what it is going to be used for.

borrower If the borrower does not have an account with the bank, the banker should pay particular attention to the borrower's reasons for not obtaining an advance from his own bank.

Unit 10: income and credit

Text 1: THE SOURCES OF INCOME

Before people can consume anything, however, they must do two things. First they must earn the income to buy the things they want. Then they must decide how the money will be spent. There are two ways to earn income: from work and from the use of wealth.

Income From Work

Most of the income comes from work. In return for working, people receive a wage or a salary. The term «wage» typically refers to the earnings of workers paid by the hour or unit of production. «Salary» refers to earnings paid on a weekly or monthly basis. How much you earn will depend on the kind of job, the abilities, the performance, and a number of other factors.

Income From Wealth.

Wealth can be expressed as the value of the things you own. Adding the value of all your possessions, bank accounts, savings, and the like will give you the total amount of your wealth.

Used in certain ways, wealth can earn income. If you owned a house, you might be able to let others use it for a fee. In that instance economists would say that you used your wealth to earn «rent». Wealth, in the form of money that is loaned to others or deposited in a savings account, will earn interest. As you can see, interest and rent are two forms of income that can be earned by wealth.

Other types of income are dividends and capital gains that can be generated from the wealth.

Vocabulary:

to consume — потреблять

earn the income — зарабатывать доход

earnings — заработки

dividends — дивиденды

capital gains — прирост капитальной стоимости

Text 2: WHERE DO PEOPLE PUT THEIR SAVINGS IN THE UNITED STATES?

Most of the nation's personal savings are held by the commercial banks, different types of savings institutions, and credit unions. The deposits held by these institutions are insured by agencies of the federal government. Savings institutions offer one or more of the following kinds of accounts:

• Passbook and statement savings accounts. The safety of your money and high liquidity are the most important advantages of these accounts. Minimum balance requirements are usually quite low, and your savings can be withdrawn at any time The disadvantage of passbook and statement savings accounts, however, is that they pay relatively low interest rates.

• NOW (Negotiable Order of Withdrawal) accounts. NOW accounts pay interest and allow the depositor to write checks. NOW accounts generally offer a slightly lower rate of return than savings accounts.

• Money-market accounts. These insured accounts allow you to write a limited number of checks while participa­ting in the "money market" where banks and other businesses buy and sell short-term credit instruments, notes and other kinds of IOU's that come due in a year or less. The rate of return for money market accounts is usually higher than for passbook savings accounts.

• Certificates of deposit. Certificates of deposit, or CD's, pay the highest rates of interest offered by banks and savings institutions. They require the money to be left on deposit for a specified period of time that can run from a few weeks to five or more years. The money can be withdrawn early, if necessary, but not without a penalty.

• Credit-union accounts. Credit unions, associations of people with some thing in common, often serve people who have the same employer, work in the same industry, or belong to a particular church, labor union, or club. Credit unions offer insured savings plans similar to those offered by other savings institutions. In most instances, however, the rate of return offered by credit unions is higher than that of the other institutions.

• US savings bonds. US savings bonds can be purchased at most savings institutions. Guaranteed by the United States government, they are one of the safest investments one can make. Since 1986 the bonds pay no less than 6 percent interest when held for five years. After five years bonds earn a variable rate adjusted every six months.

• Money-market funds. Money market funds use the resources of their investors to buy money-market certificates. Money-market funds generally pay a higher rate of return than savings and NOW accounts. Unlike other accounts at savings institutions, money-market fund accounts are not insured nor do they provide check-writing privileges.