Chapter 11
A savings tool that loans money to the U.S. government for a specified period of time. The bondholder is repaid with interest at the time of maturity.
U.S. savings bond
The rate of yearly earnings from an account, including compound interest.
annual percentage yield (APY)
Liquidity of savings refers to
availability of your funds on short notice
A savings tool in which money is deposited for a set period of time and earns a set annual rate of interest.
certificate of deposit (CD)
Interest figured on money deposited plus interest.
compound interest
Which of the following ways of figuring interest on savings will produce the most earnings?
daily
A certificate of deposit is a good savings tool to use for an emergency fund.
false
An emergency fund should contain enough money to cover two months of living expenses.
false
Inflation increases the value of savings
false
Regular savings accounts offer the highest interest earnings of all savings choices.
false
Simple interest makes money grow more quickly than compound interest.
false
The Rule of 72 is used to calculate how long it will take for savings to triple in value.
false
The Truth in Savings Act is designed to help consumers compare credit costs.
false
The lower the interest rate on a savings account, the higher the earnings.
false
Due to inflation, a dollar buys
less this year than last year
An opportunity cost of spending money is
lost opportunity to earn interest on savings
A savings account that pays a higher interest rate, but usually requires a minimum balance and has limited check writing privileges.
money market deposit account
A savings plan consists of all of the following except
opening a credit card account
All goals for savings should be
realistic, specific, and measurable
A savings account that pays interest and allows you to make deposits and withdrawals.
regular savings account
A method used to estimate the amount of time or interest it will take for savings to double in value.
rule of 72
Interest computed only on the principal.
simple interest
Savings or earnings that are not taxed until the funds are withdrawn.
tax deferred
Earnings that are free of certain taxes.
tax exempt
Simple interest is computed on
the principal
Compound interest is computed on
the principal plus the interest earned
Which of the following does not apply to a money market deposit account?
they have unlimited check writing privileges
A money market deposit account is more liquid than a certificate of deposit.
true
I-Bonds pay a fixed interest rate plus a semi-annual inflation rate based on the consumer price index.
true
Interest earnings are considered taxable income.
true
Interest on U.S. Savings Bonds is tax deferred.
true
Money is a limited resource.
true
Series EE savings bonds are issued by the U.S. Treasury and sell at half their face value.
true
The more often interest is compounded, the faster savings grow.
true
Which of the following does not apply to a certificate of deposit?
you may deposit funds in any amount and withdraw as you wish
The number of years it will take to double savings at a 3 percent annual interest rate is
24
The annual interest rate needed to double savings in 10 years is
7.2
