Personal Finance Chapter 4
Stocked-indexed CDs have...
earnings based on the stock market with higher earnings in times of strong performance
Liquidity is...
the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees.
Demand Deposits are also called...
Checking accounts and other payments methods
Deposit-type institutions are:
Commercial Banks Savings and Loan Associations Mutual Savings Banks Credit Unions
What is the major drawback of a certificate of deposit?
Most financial institutions impose a penalty for early withdrawl
To achieve long-term financial goals...
People trade off liquidity for a higher return.
Types of Financial Services:
Savings; Time Deposits Payment Services; Demand Deposits Borrowing; credit cards; Cash Loans Trusts; investments; tax assistance; financial planning
Automatic teller (ATM) is...
A computer terminal used to conduct banking transactions; Cash machine.
Commercial Banks are...
A financial Institution that offers a full range of financial services to individuals, businesses, and government agencies.
Mutual Savings Banks is...
A financial institution that is owned by depositors and specializes in savings accounts and mortgage loans.
Savings and Loan Association is...
A financial institution that traditionally specialized in savings accounts and mortgage loans.
Regular Savings Account involve...
A low/no minimum balance and allow you to withdraw money as needed.
Interest-Earning Checking requires...
A minimum balance; Share Draft Accounts
A direct deposit is...
Electronic transfer of paychecks and government payments into your checking or savings account
Financial Services include...
Interest rates Rising Consumer Prices Various Economic Factors
What is the difference between a money market account and a money market fund?
Money market accounts are insured by the FDIC but money market funds held with an investment company are not insured.
An activity account is most appropriate for...
People who write only a few checks each month and are unable to maintain the required minimum balance.
Annual Percentage Yield (APY) is...
The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequent of compounding for a 365 day period.
Compounding is...
The process that calculates interest based on previously earned interest.
What is not a common bank fee and charge?
The use of your debit card.
Debit Card is...
a plastic access card used in computerized banking transactions.
The typical dollar limit for FDIC insurance is currently...
$250,000
When interest recreates are falling, you should...
-"lock in" short termed goals -wait to refinance a home loan -lock in current rates by choosing long-term savings options
Drawbacks of money market accounts include:
-Higher minimum balance required -Fees for low balances
Tax advantages of EE Bonds are...
-Interest is exempt from state and local taxes -There is no federal income tax until redeemed
Types of CDS:
-Rising-rate -Stocked-indexed -Callable CDs -Promotional CDs
Steps to writing a check
1. date 2. name 3. $0.00 4. Zero dollars and Zero cents 5. sign 6. Memo
Fraud charges should be reported within...
60 days of receiving your statement to protect your right not to be charged for transaction.
What is the purpose of preparing a bank reconciliation?
Account for the difference between the bank statement and your checkbook balance.
Passbooks or statement accounts are...
Also known as a Regular Savings Account.
Asset Management Account is...
An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee.
Overdraft Protections is...
An automatic loan made to checking account customers for checks written in excess of their balance.
Cash Management Account is also called...
Asset management account.
How is it possible to have federal deposit insurance cover amounts that exceed $250,000?
By using a combo of individual, joint, and trust ownership accounts in different financial insitution.
What is not an influence financial services?
Social Security Benefits.
Callable CDS...
Start with higher rates and long-term maturities. The bank may "call" the account after a stipulated period, if interest rates drop.
What is the first step in preparing a bank reconciliation?
Subtract all outstanding checks and withdrawals still outstanding from the balance on the current bank statement.
What is the major benefit of purchasing US EE (Patriot) Savings Bonds?
The bonds are guaranteed by the US Government
Rate of Return is...
The percentage of increase in the value savings as a result of interest earned; yield.
Certificate of Deposit (CD) is...
A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate.
:Passbook Savings Account, Money Market Account, Stock Option
A savings plan the doesn't require a certain amount of money to be left for a specified amount of time is:
Money Market Fund is...
A savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments.
Credit Union is...
A user-owned, nonprofit, cooperative financial institution that is organized for the benefit of its members.
Deposit institutions serve as...
Intermediaries between suppliers and users of funds.
Endorsements is...
Your signature on the back of the check.
Promotional CDS...
attempts to attract savers with gifts or special rates.
Time Deposits are...
Money in savings accounts and certificates of deposit .
Common payment choices are...
Cash, Debit Cards, Checks, Credit Cards, and Online transfers.
Rising Rate/ Bump-up CDS have...
Higher rates at various intervals. Rates may be in effect for only a couple months
Share accounts are the same as:
Regular Savings Accounts
Deposit Slip/Ticket is...
Used to add funds to a checking account.
Blank endorsement is...
Your signature only on the back of the check.
Trust is...
A legal agreement that provides for the management and control assets by one party for the benefit of another.