Personal Finance 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.
US savings bond
The rate of yearly earnings from an account, including compound interest.
annual percentage yield
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
Interest figured on money deposited plus interest.
compound interest
Which of the following ways of figuring interest on savings will produce the most earnings? A. daily compound B. monthly compound C. Annual compound D. no compound
daily compound
T/F A certificate of deposit is the best place to keep an emergency fund
false
T/F Inflation increases the value of money.
false
t/f an emergency fund should contain enough money to cover two months of living expenses
false
t/f regular savings accounts offer the highest interest earnings of all savings choices
false
t/f simple interest makes money grow more quickly than compound interest
false
t/f the lower the interest rate on a savings account, the higher the earnings
false
t/f the rule of 72 is used to calculate how long is will take for savings to triple in value
false
t/f the truth in savings act is designed to help consumers compare credit costs
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 minimum balance and has limited check writing privileges
money market deposit account
A savings plan consists of all of the following except A. choosing a variety of savings instruments B. creating an emergency fund C. opening a credit card account D. setting goals for savings
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Savings or earnings that are not taxed until the funds are withdrawn.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 principle
Compound interest is computed on ___________
the principle plus the interest earned
Which of the following does not apply to apply to a money deposit account? A. they are liquid savings choice B. they have unlimited check writing privileges C. they usually earn a higher rate of interest than regular savings accounts D. they usually require a minimum deposit of $100 to $2,500
they have unlimited check writing privileges
t/f I-bonds pay a fixed interest rate plus a semi-annual inflation rate based on the consumer price index
true
t/f Series EE savings bonds are issued by the US Treasury and sell at half their face value
true
t/f a money market deposit account is more liquid than a certificate of deposit
true
t/f interest earnings are considered taxable income
true
t/f interest on U.S. Savings Bonds is tax deferred
true
t/f money is a limited resource
true
t/f the more often interest is compounded, the faster savings grow
true
which of the following does not apply to a certificate of deposit? a. you must deposit a set amount of money B. you may deposit funds in any amount and withdraw as you wish c. you must leave funds on deposit for a given period of time D. you receive a higher rate of interest if you commit to a longer term deposit
you may deposit funds in any amount and withdraw as you wish
How do you find the double in savings if you know the how many years of saving?
72 divided by the amount of years
How do you find the double in savings if you know the percent annual interest rate?
72 divided by the percent annual interest rate
