Finance Chapter 4

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APY (annual percentage yield)

100 x (interest/principal)

Who offers asset management accounts?

Investment companies

compounding

a process that calculates interest based on previously earned interest

money market account

a savings account that requires a minimum balance with earnings based on the changing market level of interest rates.

CD (certificate of Deposit)

a savings plan that requires a certain amount of money to be left for a certain amount of time

asset management account is also known as a...

cash management account

Who creates trusts

commercial bank or lawyer

Examples of deposit institutions

credit union, commercial bank, mutual savings bank

indexed CD

has earnings based off the stock market

CD portfolio

having multiple CDs maturing at different times; to give you liquidity and flexibility

What is the fee NOT used when paying for a prepaid debit card

inflation fee

rent-to-own

lease products to consumers who can own the item if they complete a certain number of monthly or weekly payments

to achieve long-term financial goals, ppl may trade off ______________ for ______________________________

liquidity, higher return

How should you choose your return rate

make sure it is higher than the inflation rate

commercial bank

offer a full range of financial services, including checking, savings, lending, and most other services.

mutual savings bank

owned by depositors, also specialize in savings accounts and mortgages.

credit alternatives for borrowing

personal loans and credit card cash advancements

Share accounts are the same as

regular savings accounts

pawn shops

regulated by the state; the interest rates charged can range from 3 percent a month to over 100 percent annually.

the 3 types of endorsements

special, blank, restrictive

rate of return

the % of increase because of interest

What is the main function of a finance company?

to make loans to consumers and small businesses

FDIC Insurance covers

traditional IRA, SEP IRA, Roth IRA, and Keogh Plans

savings and loans association

traditionally specialized in savings accounts and mortgages

When interest rates are rising...

use long-term loans, select short-term savings

when interest rates are falling...

use short-term loans, select long-term savings to "lock in" earnings at current high rates

If you lose debit card and notify within 2 days

your liability for unauthorized use is $50

if you lose your debit card and notify within 60 days

your liability for unauthorized use is $500

How long can EE bonds earn interest for?

Up to 30 years

certified check

a personal check with a guaranteed payment

I Bond

a savings bond that has an interest rate based on 2 components

money market fund

an account used for savings offered by investment companies

credit union

are user-owned, nonprofit, cooperative organizations

overdraft protection

automatic loan made for checks written in excess of the available balance

callable CDs

banks may "call" these if interest rates drop

Who offers share accounts

credit unions

cashier's check

drawn from a financial institution

rising-rate CDs

may have higher rates at various intervals

What are demand deposits

payments and checking accounts

bank reconciliation

used to make sure balances in checkbook and bank statement are the same

Typical customer of an activity account

writes few checks each month and does not maintain a minimum balance

if you lose your debit card and dont notify within 60 days

you could be liable for any and all costs


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