FINANCIAL LITERACY UNIT 5
I bond
A Savings Bond that has an interest rate based on two components is a(n):
high interest rates only at the end of the term
A challenge of rising-rate CD's include:
certificate of deposit
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:
$70,000
Assume FDIC insurance limits are $100,000. John and Mary are married. John has an account with $40,000. John and Mary have a joint account with $60,000. How much FDIC coverage does John require? Remember that John and Mary have equal ownership of the joint account.
exemption from state and local taxes low minimum deposit government guarantee
Benefits of U.S. savings bonds include:
deposit insurance a favorable interest rate
Benefits of money market accounts include:
a higher interest rate
Certificates of deposit require that a certain amount be on deposit for a stated time period in exchange for
financial institutions
The Truth in Savings law requires _____ to disclose certain charges and fees on savings account plans.
The interest rate The annual percentage yield (APY) Other terms and conditions of the savings plan Fees on deposit accounts
The Truth in Savings law requires the following items to be disclosed:
annual percentage yield
The ______ is the percentage rate expressing the total amount of interest that would be received based upon time and compounding
money market accounts
The savings alternative that offers more liquidity is:
inflation rate that changes semiannually fixed rate of interest for the life of the bond
The two parts of interest on an I bond are a(n):
$250,000
The typical dollar limit per person per financial institution for FDIC insurance is:
$5.25
Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $100 and earns 5% interest per year?
Commercial banks Savings and loans
What types of financial institutions have federal deposit insurance through FDIC?
beats the rate of inflation
When comparing savings accounts rates of return, you should choose one that:
Reduction rate
Which of the following is not a typical type of CD (certificate of deposit).
4
A $200 savings account that earned $8 after a year would have a rate of return, or yield, of ______ percent.
5
A $500 savings account that earned $25 after a year would have a rate of return, or yield, of ______ percent.
a high balance requirement overdraft protection a high rate of interest
A regular savings account usually does not have:
interest
Compounding is the process that calculates earnings based on previously earned:
some institutions charging for low balances higher minimum balance required
Drawbacks of money market accounts include:
one year
EE bonds have a minimum holding period of:
$0
How much money have savers with deposits covered by federal insurance lost in recent years?
used to pay college tuition and fees
Redeemed EE bonds can avoid federal taxation if:
government guarantee exemption from state and local taxes low minimum deposit
Select all that apply Benefits of U.S. savings bonds include:
EE I
Select the bonds that are a type of federal savings bond.
return, interest, yield, or returns
The rate of _______ is the percentage increase in the value of savings as a result of interest earned.
the percentage increase in the value of an account.
The rate of return is:
False
True or false: Typically each person is insured up to $100,000 deposited in to each financial institution.
overlap
When banks merge, this may cause coverage for FDIC insurance to:
They have not lost money in recent years. They have more security than non-insured accounts.
Which of the following sentences are true in relation to depositors with federal deposit insurance:
8%
You are in the 25% tax bracket, the after tax savings rate of return is 6%, the yield on the savings account is:
6%
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:
Liquidity
________ is the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees.
Municipal
bonds are NOT a type of federal savings bond.
Compounding
is a process that calculates interest based on previously earned interest.
APY
Annual percentage yield is also commonly expressed as:
Blank 1: federal Blank 2: deposit
Some 'shadow' banking services like money-market funds, reloadable prepaid cards are not covered by __________ __________ insurance.
interest is exempt from state and local taxes there is no federal income tax until redeemed
Some tax advantages of EE bonds are:
certificates of deposit
The savings alternative that offers less liquidity is:
To allow you to withdraw money on short notice
What is the purpose of liquidity?
a low or no minimum balance requirement
A regular savings account usually offers:
early withdrawals of CD funds
Most financial institutions impose a penalty for ____.
passbook savings account stock option money market account
A savings plan that requires a certain amount of money to be left for a specified amount of time is NOT a:
True
The rate of return you earn on your savings account should be compared with the inflation rate.
$12.72
Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $200 and earns 6% interest per year?
Investment companies
What type of financial institution typically does not have federal deposit insurance?
