Finance Chapter 4
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
