Combined Personal Finance - Chapter 5

What are examples of deposit-type financial institutions?

1. Commercial Banks 2. Savings and Loan Associations (S&L) 3. Mutual Savings banks 4. Credit Unions

How do change economic conditions affect the use of financial services?

1. Interest rate 2. Raising consumer prices 3. Other economic factors influence financial services.

What are the main types of savings plans offered by financial institutions?

1. Regular savings account 2. Certificate of Deposit 3. Interest-earning checking account 4. Money market account and funds 5. U.S. Savings bond.

What factors are commonly considered when selecting a checking account?

1. Restrictions 2. Fees and Charges 3. Interest 4. Special services

What are the major categories of financial services?

1. Savings 2. Cash Availability and Payment Services 3. Borrowing 4. Investments and other Financial Services

Mutual Savings Bank

A financial institution that is OWNED by the depositors and specializes in savings accounts and mortgages loans.

Compounding

A process that calculates interest based on previously earned interest.

Certificate of Deposit (CD)

A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate.

Credit Card

A small plastic card issued by a bank, business, etc., allowing the holder to purchase goods or services on credit.

Credit Union

A user-owned nonprofit cooperative financial institution that is organized for the benefit of its members.

Asset Management Account

An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management account.

Prepaid debit card

An alternative to traditional debit cards that are tied to a checking account, prepaid debit cards are typically tied to a direct deposit or a savings account. These cards charge monthly fees and/or usage fees and do not report payments to the credit reporting companies.

Overdraft Protection

An automatic loan made to checking account customers to cover the amount of checks written in access of the available balance in the checking account.

Analyze factors that influence the selection and use of financial services. (LO5-1)

An understanding of financial Services should include knowledge of: Savings plans, payment accounts, loans, trust services, and electronic banking. These are all used for managing daily financial activities. Technology, opportunity costs, and economic conditions influence the selection and use of financial services.

Payment service

Any service provided by a financial institution to allow one person or organization to pay another for a product or service.

A desire to pay bills using your home computer instead of writing checks - what is the payment method?

Banks and online companies - serve as third-parties to facilitate online bill payments.

Pawnshops-Loans

Based on value of tangible possessions, interest rates from 3% a month to 100% annually.

Smart cards

Digit wallets similar to ATM cards with an embedded microchip Stores past purchases, insurance infomation, medical history

What is the relationship between financial services and overall financial planning?

Financial planning is the plan put in place to achieve financial satisfaction and financial services help you complete that plan.

Credit Card Companies

Funding short-term retail lending.

I Bonds

Has interest rate based on 2 component 1-fixed rate for life of bond 2-inflation rate Every 6 months a new fixed based rate is set for new bonds Additional interest payment is recalculated twice a year based on the current inflation rate Sold in any amount over $25 Minimum holding is 1 year

Interest-earning checking

Require a minimum balance Under minimum balance, no earned interest and incur a service charge Also called share draft accounts

Types of CDs - descriptions

Rising-rate or bump-up CDs - higher rates at various intervals Liquid CDs - w/minimum balance offer an opportunity to w/draw money w/o a penalty Zero-coupon CDs - purchased at a deep discount w/no interest payments. $5,000 for $10,000 in 10 yrs Indexed CDs - have earnings based on the stock market. Based on CPI higher returns as inflation increases Callable CDs - start w/higher rates, long maturities Bank may "call" (close) acct after set period - receives the original deposit and any interest. Promotional CDs - attract savers w/gifts or special rates.

First buying CD - buying a new one at maturity

Rolling over CD

A middle-aged person wants assurance that the funds are safe - what is his/her major influence?

Safety

Near-field communication (NFC) Mobile Transfers

Technology stores credit card and banking account information

Car Title Loan Companies

Using your car as collateral for 30 days as much as 200% interest.

Underbanked

use of "shadow" financial services in addition to having a bank account.

Unbanked

using a variety of "shadow" financial services rather than having a bank account

What would be the annual percentage yield (APY) for a savings account that earned $174 on a balance of $3,250 over the past 365 days?

$174 / $3,250 = .0535 (5.35%)

A payday loan company charges 5 percent interest for a two-week period. What would be the annual interest rate from that company?

26 wks x 5% = 1.30 (.0130%)

What would be the annual percentage yield for a savings account that earned $56 in interest on $800 over past 365 days?

56 / 800 = .07 x 100 = 7.00%

A need to send funds for a purchase from an organization that requires guaranteed payment - what is the payment method?

A certified check - guarantees payment

Automatic Teller Machine (ATM)

A computer terminal used to conduct banking transactions also called a cash machine.

Vishing

A scam by phone

Traveling to Asia, you desire to be able to access funds in the local currencies of various countries - what is the payment method?

Electronic traveler's check - allows access to funds in the local currency of various countries

Cash Cashing Outlets

Interest rates of 1% to 20% of face value of check. Offer tax filing, money orders, private postal boxes, utility bill payment, sale of transit tokens

Brokerage Firms

Investment advisors

Truth in Savings (TIS)

Reflects the amount of interest a saver should expect to earn.

Low Liquidity

The inability to obtain your money quickly.

HH Bonds

WERE current-income bonds w/interest deposited electronically every 6 months

Pawnshops

neighborhood bankers and local shopping malls

If a person has ATM fees each month of $18 for six years, what would be the total cost of those banking fees?

$18 x 12 = $216 x 6 = $1,296

Common mistakes when managing cash needs

1. Over spending as a result of impulse buying and using credit. 2. Having insufficient liquid assets to pay current bills. 3. Using savings to pay for current living expenses 4. Failing to put unneeded funds in an interest-earning savings account or investment program.

Share Account

A regular savings account at a credit union.

Which of the following are deposit-type institutions that serve as financial intermediaries?

Answer: Credit unions Commercial banks Savings and loans

Currency exchange

CCOs offer electronic tax filing, money orders, private postal boxes, utilities bill payment, and sale of transit tokens.

Online payments do NOT include

Google Wallet PayNearMe Smart Cards eBillme

Stored-value cards

Prepaid cards for telephone service, transit fares, highway tolls, laundry service, and school lunches Prepaid debit cards

You write only a few checks a month and you want to minimize your costs - what is the payment method?

Regular checking account - with a minimum balance monthly service charges are waived.

Truth in Savings Law

States that financial institutions have to inform you of fees on deposits, interest rates, annual percentage yield, and terms & conditions of savings plans.

The savings alternative that offers more liquidity is:

certificates of deposit money market accounts

Types of financial Services

savings financial planning investments borrowing payment services insurance

Financial services include all of the following except:

savings payment services borrowing debt counseling

The savings alternative that offers less liquidity is:

savings accounts money market accounts certificates of deposit

A money market fund is a:

savings instrument

How does a money market account differ from a money market fund?

"A money market account is an interest-bearing deposit account offered by banks and credit unions." "A money market fund is a type of income-oriented mutual fund that invests in short-term debt securities." "This is the main differentiator between the funds and the accounts — although the value per share in a money market fund is typically one dollar, that can change. In a money market account, the value of your dollar will always be a dollar." 1. A money market account is a bank deposit, while a money market fund is an investment product 2. A money market account is insured, the other is not. 3. You pay to hold a money market fund. 4. Money market accounts restrict withdrawals 5. Money market funds often have bigger minimums https://www.businessinsider.com/money-market-account-vs-money-market-fund

A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves two months of interest, what would be the amount for early withdrawal on a $20,000, 5 percent CD?

$20,000 x 5% = $1,000 $1,000 / 12 = $83.33 $83.33 x 2 = $166.67

Janie has a joint account with her mother with a balance of $562,000. Based on $250,000 of Federal Deposit Insurance Corporation coverage, what amount of Janie's savings would not be covered by deposit insurance?

$250,000 + $250,000 = $500,000 $562,000 - $500,000 = $62,000 $62,000 / 2 = $31,000 $31,000 uninsured Janie's amount

What is the annual opportunity cost of a checking account that requires a $300 minimum balance to avoid service charges? Assume an interest rate of 3 percent.

$300 x 3% = $9.00

What are the benefits of U.S. savings bonds?

- Low Risk - Guaranteed by the federal government

What factors do consumers usually consider when selecting a financial institution to meet their saving and checking needs?

1. Where to get the best return on savings. 2. How to minimize the cost of checking and payment service. 3. Able to borrow money, when needed.

If you earn a 4.2 percent return on your savings, with a 15 percent tax rate, what is the after-tax rate of return?

1.00 - .15 = .85 .85 x 4.2% = .0357 (3.57%)

An ATM with a service fee of $2 is used by a person 100 times in a year. What would be the future value in 10 years (use a 3% rate) of the annual amount paid in ATM fees?

100 x $2 = 200 x 11.464 = $2,292.80

You are in the 25% tax bracket. So, the yield on the savings account is 8%, and the after-tax savings rate of return is:

6%

You are in the 25% tax bracket, the after tax savings rate of return is 6%, the before-tax yield on the savings account is:

8%

Mutual Savings Banks

A financial institution that is owned by depositors and specializes in savings accounts and mortgage loans.

Commercial Bank

A financial institution that offers a full range of financial services to individuals, businesses and government agencies.

Savings and loan associations

A financial institution that traditionally specialized in savings accounts and mortgage loans but now offers many of the same services as commercial banks.

Savings and Loan Association (S&L)

A financial institution that traditionally specializes in savings account and mortgage loans.

Trust

A legal agreement that provides for the management and control of assets by one party for the benefit of another.

What might be a savings goal for a person who buys a five-year CD paying 4.67 percent instead of an 18-months savings certificate paying 3.29 percent?

A person saving for a long period of time i.e. children education, vacation home, or retirement will use a 5-year CD.

Debt Card

A plastic access card used in computerized banking transactions, also called cash card.

Debit Card

A plastic access card used in computerized banking transactions; also called a cash card.

Money Market Funds (MMFs)

A savings - investment plan offered by investment companies, with earnings based on investments in various short term financial instruments. Mutual funds that invest in short-term, low-risk securities and allow investors to write checks against their accounts. These accounts pool money from individuals and invest in securities that have a short-term maturity, such as one year or less.

Money Market Account

A savings account offered by Banks, Savings and Loans, and Credit Unions that require a minimum balance and has earnings based on market interest rates.

Money Market Accounts

A savings account offered by banks, savings and loan associations, and credit unions that requires a minimum balance and has earnings based on market interest rates. A savings account offered by a bank (or a mutual fund). The account typically requires 1) a minimum deposit and 2) that you maintain a minimum balance. The account invests in certificates of deposit and treasury bills and pays a rate of interest that rises and falls with the economy.

Money Market Fund

A savings investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments.

Certificates of Deposit (CDs)

A savings plan requiring that a certain amount be left on deposit for a states time period to earn a specified interest rate. Savings accounts that guarantee a depositor a set interest rate over a specified interval as long as the funds are not withdrawn before the end of the period—six months or one year for example.

Credit unions

A user-owned, non-profit cooperative financial institution that is organized for the benefit of its members.

Savings plans

A way to save money for the long-term, which for most people means retirement. Examples of these savings plans include 401(k) and 403(b)s, which are employer-sponsored retirement plans to which both the employee and employer contribute, and IRA and Roth IRAs, which are retirement accounts set up by individuals.

Annual Percentage Yield (APY) Formula when the number of days in the term is 365 or where the amount does not have a stated maturity, the APY formula is simply

APY = 100(Interest / Principal) 100[(1+$56.20/$1,000)365/365 - 1] =.0562 = 5.62%

Annual Percentage Yield (APY) Formula

APY = 100[(1+Interest/Principal) 365 days in term - 1 Principal = Amount of funds on deposit Interest = Total dollar amt earned on the principal Days in term = Actual number of days in the term of the account

Compare the costs and benefits of these two checking accounts: Account 1: A regular checking account with a monthly fee of $6 when the balance goes below $300. Account 2: An interest-earning checking account (paying 1.2 percent), with a monthly charge of $3 if the balance goes below $100.

Account 1: Regular Checking is free if the balance does NOT go below $300. Account2: Interest-earning checking will receive interest (money) if the balance does NOT go below $100.

Savings Account

An account at a depository institution that is designed to hold money not spent on current consumption. This type of account accumulates interest.

FDIC (Federal Deposit Insurance Corporation)

An agency developed by the federal government to regulate banking and and investment activities The government agency insures customers' deposits if a bank fails, insures bank deposits up to $5,000

Share Draft Account

An interest-bearing checking account at a credit union.

Online Banks

Banks that are regulated just like any other bank, even those they operate entirely over the Internet, yet because they avoid the "bricks and mortar" costs of conventional institutions they often pay higher interest rates than other institutions.

Select all that apply Use a credit card to:

Build credit history Delay the payment for a purchase Avoid an annual fee Buy online for large purchases Avoid bills to be paid in the future Obtain better fraud protection Avoid possible interest charges

Payday Loan Companies

Cash advances as much as 780% interest annually. Writes a check for $155, to borrow $100, for 14 days. Cashed when they get paid. $391%. Some times roll over to another 14 days.

Payday loan companies

Cash advances, check advance loans, postdated check loans, and delayed deposit loans

How do changing economic conditions affect the use of financial services?

Changing interest rates, rising consumer prices (inflation) and other economic factors can effect financial services. When interest rates are rising: - Use long-term loans to take advantage of current low rates. - Select short-term savings instruments to take advantage of higher rates when they mature. When rates are falling: - Use short-term loans to take advantage of lower rates when you refinance the loans. - Select long-term savings instruments to "lock in" earnings at current high rates.

Activity accounts

Charge a fee for each check written Charge a fee for each deposit Has a monthly service charge NO minimum balance

Check Clearing for the 21st Century Act

Check 21 Shortens the processing time Established the substitute check = a digital reproduction of the original paper check

What are examples of deposit financial institutions?

Commercial Banks Savings and Loan Associations Mutual Savings Banks Credit Unions

Costs and Benefits of U.S. Savings Bonds

Cost: - Lower rate when redeemed within first 5 years Benefits: - Rate varies with interest rates (I-bonds) - Low minimum deposit - Government guaranteed - Exempt from state, local income taxes

Costs and Benefits of Money Market Accounts

Cost: - Minimum Balance or fees may be charged - Limited # of monthly withdrawals Benefits: - Low-risk - Insured - highly liquid - a favorable interest rate "If you want a souped-up savings account for the long term, but need regular (if limited) access to your cash, an interest-bearing money market account may be the answer, especially if it comes with a convenient debit card or checks." https://www.businessinsider.com/money-market-account-vs-money-market-fund

Costs and Benefits of Money Market Funds

Cost: - Not insured - Low rate of return - Expense ratios must be paid - High opening deposit Benefits: - Low-risk - highly liquid "If you're looking for a low-risk investment account as a place to store a windfall or some ready money for a while or to bring some diversification to your investment portfolio, a money market fund could be a good choice." https://www.businessinsider.com/money-market-account-vs-money-market-fund

Costs and Benefits of Savings Accounts

Cost: -Low rate of return Benefits: -Low minimum balance -Ease of withdrawal -Insured - Low-risk

Costs and Benefits of Certificates of Deposits (CDs)

Cost: -Possible penalty (reduced interest) for early withdrawal -Minimum Deposit Benefits: - Guaranteed rate of return for time of CD - Insured (When purchased from bank or comparable financial institution)

Select all that apply What types of financial institutions have federal deposit insurance through FDIC?

Credit unions Commercial banks Savings and loans Investment companies

A _______ ticket or slip is used to add funds to a checking account. This is a one word answer.

Deposit

Identify the factors used to evaluate different savings plans. (LO5-4)

Evaluate a savings plan on the basis of rate of return, inflation, tax considerations, liquidity, safety, restrictions, and fees.

Investment Companies

Firms managing funds for investors. An investment company may manage several mutual funds. Non-depository institutions that sell shares to individuals and use the proceeds to invest in securities and to create mutual funds. Combines savings and investments.

What would be the value of a savings account started with $700, earning 4 percent (compounded annually) after 10 years?

Future Value of $1 after a given number of time periods $700 x 1.480 = $1,036

What amount would you have it you deposit $1,800 a year for 30 years at 8 percent (compounded annually)

Future Value of $1 paid in the end of each period for a given number of time periods (Annuity) $1,800 x 113.280 = $203,904

Problem Financial Businesses

High fees and excessive interest rates. (high risk, unbanked (no bank services) or underbanked -(some banks services).

Finance Companies

High rate loans to consumers and businesses.

A person is concerned with loss of buying power of funds on deposit - what is his/her major influence?

Inflation

How do inflation and taxes affect earnings on savings?

Inflation and taxes reduce the real interest earned on savings.

After-tax rate of return

Interest rate x (1 - Tax rate)

After-tax rate of return formula

Interest rate x (1-tax rate)

After-tax rate of return Formula

Interest rate x (1.00 - Tax rate)

Costs and Benefits of Asset Management Accounts

Investment brokers and other financial institutions offer this all-purpose account, which includes a checking account, debit card, online banking, mobile apps, and a line of credit for obtaining quick cash loans. These accounts also allow buying and selling stocks, bonds, mutual funds, and other types of investments. A consolidated financial services account has the benefits of: 1. Keeping track of finances in a single location. 2. Fewer monthly and quarterly statements. 3. Lower fees when working with one financial institution. 4. Simplified tax reporting with dividends and interest in one form. 5. Ease of communicating financial information to family members.

Life Insurance Companies

Large holders of individual savings; assets of life insurance company are earned by selling policies for much more money than the likely cost of death benefits to be paid out at the time they are sold. Insurance companies typically invest their assets in corporate stock, corporate stock bonds and home mortgages. Financial security for dependents.

Rent to Own Centers

Lease to own after a number of payments. Up to 300% interest.

An older couple needs easy access to funds for living expenses - what is their major influence?

Liquidity

__________is the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees.

Liquidity

Mortgage Companies

Loans for home purchase.

Switch kits

Make changing banks easier

EE Bonds

May be purchased for any amount greater than $25. Purchased online at face value $50 for $50 interest accrues monthly and compound semi-annually Main tax advantages - 1-interest earned is exempt from state and local taxes 2-Federal income tax on earnings is not due until bonds are redeemed - may be exempt from federal income tax if funds are used to pay tuition and fees at a college

Select all that apply Use a debit card to:

Obtain better fraud protection Delay the payment for a purchase Buy online for large purchases Avoid possible interest charges Build credit history Avoid bills to be paid in the future Avoid an annual fee

What financial services are available through electronic banking system?

Obtaining cash Transfer funds Direct deposit

Non-Deposit Institutions

Offer various financial services, but are not insured.

Financial supermarkets

One-stop financial service (savings, checking, credit, insurance, investments)

Brenda Young desires to have $15,000 eight years from now for her daughter's college fund. If she will earn 6 percent (compounded annually) on her money, what amount should she deposit now? (Use Present Value of a single amount)

Present Value of $1 to be received at the end of a given number of time periods $15,000 x .627 = $9,405.00

A saver desires to maximize earnings from the savings plan - what is the saver's major influence?

Rate of Return

What is usually influenced in selecting a savings plan

Rate of return or Yield - % increase in value of savings & increase w/frequency of compounding Inflation - HIGHER consumer prices result in LOWER buying power of interest earned on savings. Tax consideration - Taxable interest reduces amount of earnings Liquidity - Ease with which savings can be withdrawn Safety - Available of deposit insurance and risk Restrictions - Minimum balance limitates Fees - for additional transactions

Truth in Savings Act

Requires financial institutions to disclose the following on savings account plans: 1-Fees on deposit accounts 2-Interest rate 3-Annual percentage yield (APY) 4-Terms and conditions of savings plan

The rate of_______ is the percentage increase in the value of savings as a result of interest earned.

Return

Types of CDs

Rising-rate or Bump-up Liquid Zero-Coupon Indexed Callable Promotional

What type of financial institution typically does not have federal deposit insurance?

Savings and loans Commercial banks Investment companies

Deposit Institutions

Serve as intermediaries between savers and borrows and offer insured accounts.

Why shouldn't you select financial services only on the basis of monetary factors?

Services vary from provider to provider and it is not only monetary factors that matter. Evaluate costs and benefits in both monetary and personal terms to choose the financial services that best service your needs.

A ________ draft account is an interest-bearing checking account at a credit union. This is a one word answer.

Share

U.S. Savings Bonds

Small denomination bonds that are issued by the federal government at a discounted price and grow to full value over time.

With a 28 percent marginal tax rate, would a tax-free yield of 7 percent or a table yield of 9.5 percent give you a better return on your savings?

Table Yield: = 1.00 - .28 = .72 x .95 = .684 (6.84%) Tax-free Yield: = 7% The 7% tax-free yield is better because the table yield of 9.5% after taxes becomes 6.84%.

How does money market account differ from a money market fund?

The money market account is covered by federal deposit insurance and has earings on the interest rate. The money market fund is not covered by federal deposit insurance and has earings on investments.

Assess the costs and benefits of various savings plans. (LO5-3)

The most common savings plans available to consumers are regular savings accounts, certificates of deposit, money market accounts, money market funds, and U.S. savings bonds.

Rate of Return

The percentage of increase in the value of savings as a result of interest earned; also called yield. The Rate of Return on a savings accounts or other investment is the ratio between the interest earned for the year and the amount in the savings account.

Annual Percentage Rate (APR)

The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365 day period.

Annual Percentage Yield (APY)

The percentage rate expressing the total amount of interest that would be received on a deposit based on the annual rate and frequency of compounding for a 365-day period.

Overdraft protection is an automatic loan made to checking account customers to cover checks written in excess of:

Their balance

Which of the following attributes is not important when selecting a financial institution?

There is a state or national charter for the institution

What is the purpose of liquidity?

To allow you to invest for the long-term To allow you to add money to accounts at any time To allow you to withdraw money on short notice

Financial services can change due to such factors as changing interest rates and rising consumer prices.

True

The rate of return you earn on your savings account should be compared with the inflation rate.

True

Regular checking accounts

Usually, has a monthly service charge may be voided by keeping a minimum balance in account Waived monthly fee by keeping a certain amount in savings.

Evaluate the costs and benefits of different types of payment accounts. (LO5-5)

When considering various payment alternatives, electronic methods include debit cards, mobile and online payment systems, stored-value cards, and smart cards. Regular checking accounts, activity accounts, and interest-earning checking accounts can be compared with regard to restrictions (such as a minimum balance), fees and charges, interest, and special services. Other payment alternatives include certified checks, cashier's checks, money orders, electronic transfers, and traveler's checks.

Compare the types of financial institutions. (LO5-2)

When selecting a primary financial service provider, your choices include: commercial banks savings and loan associations mutual savings banks credit unions life insurance companies investment companies online banks. These financial institutions should be assessed on the basis of services offered, rates, and fees, safety, convenience, and special programs available to customers.

Annual Percentage Yield Formula

When the number of days in the term is 365 or where the account does not have a stated maturity, the APY is simply: APY = 100(interest/principal)

What factors do consumers usually consider when selecting a financial institution?

Where to get the best return on savings. How to minimize the cost of checking and payment service. Ability to borrow money, when needed. 1. Services 2. Costs, Fees, Earnings 3. Convenience 4. Online, Mobile Banking

Are checking accounts that earn interest preferable to regular checking accounts? Why or Why not?

Yes, checking accounts that earn interest are preferable to regular checking account becasue the account earns interest depending on the minimum balance required

Drawbacks of money market accounts include:

a favorable interest rate some institutions charging for low balances insurance higher minimum balance required

A regular savings account usually offers:

a high balance requirement a high rate of interest a low or no minimum balance requirement overdraft protection

Select all that apply A regular savings account usually does not have:

a low or no minimum balance requirement overdraft protection a high balance requirement a high rate of interest

What would be the net annual cost of the following checking accounts? a. Monthly fee, $3.75; processing fee, .25 per check written, an average of 14 a month. b. Interest earnings of 4 percent with a $500 minimum balance; average monthly balance, $600; monthly service charge of $15 for falling below the minimum balance, which occurs three times a year (no interest earned in these months.)

a. Monthly fee: $3.75 x 12 = $45.00 Check fee: .25 x 14 = $3.50 $3.50 x 12 = $42.00 $87.00 b. Service Charge: $15 x 3 = $45.00 Interest earned: $600 x 4% = $24.00 24/12 = 2 x 9 = $18 45 - 18 = 27

A deposit ticket is used to add funds to:

an account

When comparing savings accounts rates of return, you should choose one that:

beats the rate of inflation is equal to the rate of inflation is lower than the rate of inflation

Select all that apply Common payment choices do not include:

cash credit cards corporate bonds municipal bonds checks ATM cards

A savings plan that requires a certain amount of money to be left for a specified amount of time is NOT a:

certificate of deposit passbook savings account money market account stock option

Common choices for making payments include all of the following except:

checks cash credit cards online/mobile transfers installment loans

Overdraft protection is designed to:

cover underfunded checks increase the overall balance in the account increase your prestige as a bank customer be only available to long standing customers

All of the following are deposit-type institutions that serve as financial intermediaries except:

credit unions insurance companies savings and loans commercial banks

Select all that apply Benefits of money market accounts include:

deposit insurance higher minimum balance required charges for low balances a favorable interest rate

A drawback of U.S. savings bonds is:

exempt from state and local taxes low minimum deposit lower rates for early redemption government guaranteed

Certified checks, cashier's checks, and money orders allow you to make a payment that the recipient knows is

guaranteed

A money order:

guarantees payment is the exact same thing as a certified check is the same as a traveler's check does not guarantee payment

Select all that apply Benefits of U.S. savings bonds include:

lower rates for early redemption government guarantee low minimum deposit exemption from state and local taxes

A ______ fund is an account used for savings offered by investment companies.

money market

A savings plan that requires a certain amount of money to be left for a specified amount of time, subject to penalty for early withdrawal, is called a:

money market account certificate of deposit stock option passbook savings account

Share draft accounts at a credit union:

offer large interest rates are no-interest bearing offer no liquidity are interest bearing

Regular savings accounts

passbook or statement accounts Credit union are called - share accounts

Select all that apply Some things to consider when selecting your financial institution include

services offered convenience fees and charges switch kit requirements online banking

The rate of return is:

the percentage required for fees on an account. the percentage change to switch accounts at banks. the percentage increase in the value of an account.

An opportunity cost is:

what you give up