Personal Finance unit 4:3 first quiz

Equation for Rule of 72?

Years to double = 72 ÷ interest rate

Rule of 72

a formula that helps you calculate how long it will take for your savings to double in value

529 plan

a saving plan for education designed to help set aside funds to pay for future college costs

money market account

a savings account that offers a higher rate of interest when you make large deposits

savings bond

a savings product or certificate issued by the U.S. government with values ranging from $50 to $10,000

term

a set period of time

club account

an account used to save money for a special reason, such as a holiday, a vacation, or college

U.S. Department of Treasury

an executive department of the United States government whose purpose is to manage the government's money

IDA

an individual development account or a matched savings accounts into which an organization, such as a foundation, corporation, or government, agrees to add money which matches the money you deposit

name the 5 main saving options?

basic savings accounts high-yield savings accounts money market accounts online savings accounts credit union savings accounts

what equation is this A = P(1 + r)n for?

calculating interest

CD

certificate of deposit; an account where you leave your money for a set period of time and are unable to make deposits or withdrawals during this time unless you pay penalties

variable interest rates

different interest rates paid for different size balances, with higher balances earning higher rates

Compound interest is the interest that is divided into different accounts. True False

false

When you receive a savings bond worth $100, you can cash it for $100 right away. True False

false

compound interest

interest the bank gives on the interest that has been already earned

If you received a $100 savings bond yesterday, can you use the money from the savings bond to buy an item that costs $85 today? yes no

no

An online savings account _____. has more restrictions on how often withdrawals can be made and typically requires a minimum balance works nothing like a basic bank savings account offers higher interest rates because they don't have the overhead that standard banks have offers lower interest rates because it costs more money to maintain the online site

offers higher interest rates because they don't have the overhead that standard banks have

Select each of the tools and services available with a savings account. car loan online statement automatic transfer direct deposit online savings plan transfer money to other accounts check books ATMs

online statement automatic transfer direct deposit online savings plan transfer money to other accounts ATMs

Use the Rule of 72 to solve. Manny has his money in a savings account earning 4.5% interest. How long it will take his money to double? twelve years sixteen years two years eighteen years

sixteen years

interest thresholds

the minimum balances before the bank begins paying interest

principal

the original amount of money invested or deposited into a savings account

return

the profit or gain from saving or investing money

Before you select a savings account, you want to think about how long you'll keep your money in the account. True False

true

The formula for the Rule of 72 is _____. years to double equals 72 multiplied by the interest rate years to double equals 72 divided by the interest rate months to double equals 72 divided by the interest rate years to double multiplied by 72 equals the interest rate

years to double equals 72 divided by the interest rate

annual percentage yield

(APY); the amount of interest you will earn in one year from a savings account

What do the letters mean in the calculating interest equation?

A= money accumulated. p= principal. r= interest rate n= number of years the amount is in the account.

What is an incentive for a person to contribute to an IDA? It is good for the government. It earns the highest interest rates available at a bank. The interest on the account is not taxed. An organization matches the amount deposited.

An organization matches the amount deposited.

There are several steps to opening a savings account. Select all of these steps. Fill out a deposit slip and deposit at least the minimum amount of money. Complete a W-2 form. Order checks. Go to the bank and sign the necessary bank forms. Choose a director for the account. Collect all the required information.

Fill out a deposit slip and deposit at least the minimum amount of money. Go to the bank and sign the necessary bank forms. Choose a director for the account. Collect all the required information.

treasury bills

T-bills; a savings product sold by the US Treasury department at a discount from their face value and range in terms from a few days to six months

treasury notes

T-notes; a savings product that pays interest every six months and is issued in terms of two, three, five, and ten years

Treasury Inflation-Protected Securities

TIPS; a savings product that pays interest twice per year and provides protection against inflation