Personal Finance Chapter 6

What do banks usually offer?

ATMs, numerous locations, and drive-up windows.

What is not an example of a long-term savings goal?

Automobile purchase

A deposit that is set aside for a specified length of time at a specified rate is called a _______.

CD (certificate of deposit)

A type of savings plan whereby you set aside money at a financial institution for a set period is a

CD (certificate of deposit)

Interest drawn on the sum of the original principal plus interest is called _______________ interest.

Compound

Money will earn more interest if it is

Compounded daily

______________ involves an employer or financial institution electronically depositing your paycheck into a bank account.

Direct deposit

Federal insurance for depositors in commercial banks and savings and loans is provided by the ____________.

FDIC

A subsidized student loan has higher interest rates, and interest begins the day you receive the loan.

False

Deposits in savings and loan associations and commercial banks, but not credit unions, are insured.

False

Work-study programs will replace your need for other sources of money for college funding.

False

________________ banks provide the widest variety of banking services of any of the financial institutions.

Full-service commercial

Besides a scholarship or loan, another form of educational funding is a _________, which is based on financial need, does not have to be repaid, and is often funded by the government.

Grant

Money that is paid for the use of money is called _______________.

Interest

The speed with which savings can be readily converted to cash is called _____________.

Liquidity

The day on which a certificate of deposit must be renewed or cashed in is called the _____________.

Maturity date

A type of savings plan that offers a more competitive interest rate than a regular savings account is called a __________________.

Money market account

A _________________________ is a type of mutual fund that invests in low-risk securities and is considered safe even though it is not FDIC insured.

Money market fund

Deposits kept in credit unions are insured by the __________.

NCUA

The amount of money you place in savings is called ________.

Principal

What is the most liquid?

Regular savings

_________________ means that you are guaranteed not to lose your savings deposit, even if the bank fails and goes out of business.

Safety of principal

A savings or checking account at a credit union is called a ______________ account.

Shared

Money borrowed for education, called ___________, can be subsidized or unsubsidized.

Student loan

Cash allowances awarded to students to go to college, called scholarships, may be based on need or on high test scores.

True

Compound interest refers to interest paid on principal and interest.

True

Emergencies, vacations, social events, and major purchases are an example of short-term needs.

True

Financial institutions can offer interest compounded in many ways, including daily, quarterly, and yearly.

True

If a depositor withdraws part or all of a certificate of deposit before its maturity date, there will be an early withdrawal penalty.

True

Some ways to make saving easier include direct deposit and automatic deductions.

True

When choosing a savings account, you should consider safety, liquidity, convenience, potential yield, and fees.

True

What is not a benefit of a direct deposit?

Your money earns more interest than in any other type of savings plan.