Chapter 10 & 11 Flashcards
Advantages of regular savings account -
higher liquidity
safe
disadvantages of regular savings account -
lower interest rate
advantages of CD’s -
has a fixed rate
safe
disadvantages of CD’s
penalty for early withdrawl
maturity date
Advantages of money market funds (not an acct)
high interest rate
disadvantages of money market funds -
higher then savings account
not safe at all
…. involves an employer or financial institution electronically depositing your paycheck into a bank account
direct deposit
a form of educational funding that doesn’t have to be repaid, is often funded by the government, and is in addition to scholarships and loans, is called for a ….
grant
interest drawn on the sum of the original principal plus interest is called …….. interes
compound
money that is paid for the use of money is called -
interest
a regular account at a credit union is called an …… account
share
….. occurs when student loans are combined into one large loan
loan consolidation
deposits kept in credit unions are insured by the …
NCUA
federal insurance for depositors in commercial banks and savings and loans is provided by the …
FDIC
the greater the ……… you are willing to take, the higher rate of interest u are willing to receive -
risk
a deposit that is set aside for a specified length of time at a specified rate is called an
CD
a type of savngs plan that offers a more competitive interest rate than a regular savings account is called an
money market account
the capability of financial resources being readily converted to cash is called
liquidity
the amount of money you place in savings is caled
principal
money borrowed for education, called ……, can be subsidized or unsubsidized
student loans
the day on which a certificate must be renewed of cashed in is called
maturity date
when a CD is cashed before its maturity date, the depositor must pay an ….. penalty
early withdrawl
T or F
emergencies, vacations, social events, major purchases are examples of short term needs
true
T or F
cash allowances awarded to students to go to college, called scholarships, are based on need or may be based on high test scores
true
T or F
a subsidized student loan has a higher interest rate, and interest begins the day you receive the loan
false
T or F
compound interest refers to interest paid on principal and interest
true
T or F
work study programs will replace your need for other sources of money.
False
T or F
when choosing a financial institution in which to place your savings, you should consider safety, liquidity, convenience and purpose
True
T or F
deposits in savings and loan associations and commercial banks are insured by the FDIC
true
T or F
if a depositor withdraws part r all of a certificateof deposit before its maturity date, there will be an early withdraw penalty
true
T or F
financial institutions can offer interest compounded daily because of computers that makes rapid computations possible
true
T or F
some ways to make saving easier include dirrect deposit and automatic deductions
true
what are 3 examples of a long - term savings goal
home ownership
college education
retirement
what is the most liquid
regular savings
a type of savings plan whereby you set aside money at a financial institution for a set period is a
certificate of deposit
what do banks usually offer
ATMs
numerous locations
drive up windows
The FDIC insures a depositors money up to ….
250,000
which pays the highest total interest when deposits are withdrawn at irregular times
compounded daily
short term needs examples -
vacation, emergencies
they are things that you’re saving up for now for the future -
long term needs
long term needs examples -
home ownership
education
retirement
investing
its knowing that you are living within your means -
financial security
4 ways ur money grws-
principal
interest
compound interest
annual percentage yeild
its the money you deposit ; the original amount
principal
the money from the bank (borrowing money from the US)
interest
its making more money interest on interest
grows faster
compounded interest
what the rate will be every year (how much you’ll make over a year!!)
annual percentage yeild
where can you save ? (5)
commercial banks savings banks savings&loan associations credit unions brokerage firms
its banks that are for proft
commercial banks
theres not that many
they offer 2 types of services (loans, mortages, savings)
savings bank
they do loans and have savings
savings&loan association
member-owned
- lots of servies
- in business to help community (not to make $$)
credit unions
they have diff types of security stocks & bonds
brokerage firms
They are high liquidity
They have a lower interest rate
Regular savings account
Means its easy to get to money
Liquidity
Its the money you put in, Highest interest rate, Can't take it out until a certain time Maturity date Penalty for early withdraw
certificate of deposit (CD)
- It has a minimum balance - usually high, but gets high interest rate
- variable interest rate but usually higher than savings accounts
Money market account
its not liquid, you dont often touch this money
money market account
3 savings options -
savings account
CD
money market account
5 things to selecting a savings plan -
liquidity safety convenience interest-earning potential fees/restrictions
its the capability of financial resources being converted to cash -
liquidity
questions like will your money be protected/ safe?
safety
an ATM is a ….
convenience
questions like whats the interest on that savings?
interest-earning potential
questions like are there any fees? fees for early withdraw?
fees/restrictions
its telling the workers just to pull $$ from your account
automatic payroll deductions
3 reasons for investing -
helps beat inflation
increases wealth
fun and challenging
5 stages of investing -
put-and-take account beginning investing systematic investing strategic investing speculative investing
its when you first get a job and begin investing
beginning investing
they are savings to earn a financial return
investments
its the rise of prices
inflation
its planning ahead & comfortable w/ doing it on a reg. basis (a plan for long term)
systematic
its to come up w/ a plan (closer to retirement) & its where the money will last ten years in the future (maximite profit w/ lower risk)
strategic
(rich people)
kind of gambling where there is rick to lose A LOT of $$ (make a lot or lose a lot)
speculative
5 types of risk -
interest rate political market non-market company/industry
its where if it goes down, youll lose money -
interest-rate risk
its anything that costs money / or raises taxes
political risk
it affects all investments at once, stock market go up & down
(natural disaster, terrorism)
market risk
where a certain industry can be affected as another industry is not, but soon affects all
non-market risk
affects a company at a time -
company/industry risk
its $ you get from stocks
dividends
when choosing an investment make sure ……
it will be safe
can u afford it
tax benefits?
wise investment practices -
define financial goals go slowly follow through keep good records seek advice keep knowledge know limits
sources of financial information -
newspapers newsletters finanacial magazines financial advisers financial statements online investor education
3 investment options -
low risk
medium risk
high risk
its a low-to-medium return
low risk
its a medium return
medium risk
a high return -
high risk
examples of low risks -
corporate & municipal bonds
US government saving bonds
treasury securities
examples of medium risks -
mutual funds
annuities
self-managed retirement accounts
real estate
examples of high risk -
penny stocks collectibles futures options commodities
T or F
the put-and-take account is an emergency fund
true
T or F
public corporations are not required to publish annual reports
false
T or F
market risk is caused by business declines or other events
true
T or F
political risk refers to the effect of higher interest rates when you are locked into lower rates
false
T or F
an investor does not need to build trust with a financial adviser. it is important only to communicate goals clearly -
false
T or F
investments that require more risk usually provide greater potential returns
true
T or F
an investment in real estate (owning your own home) is generally considered relatively safe but fairly illiquid -
true
T or F
beginning investments should include only long-range goals such as planning for retirement -
false
T or F
an investment adviser is responsible for your decisions
false!!
T or F
Forbes and Business Week are examples of finanial magazines -
true
which risk is associated with a business decline -
market risk
permanent investments are generally made to provide for ….. goals
long-term
how long are treasury bills issued -
1 year or less
the final level or realm of investing is called -
speculation
are stocks a high risk/high return statement
yes
the first goals to wise investment practices -
define financial goals
financial advisers should provide u info like ….
training/background
fees
philosophy of investing
a savings plan whereby an individual invests on a regular and planned basis
systematic investment
to find the most detailed data about a corporation, consult …..
financial magazines
its a rise in the general level of prices
inflation
is the use of savings to earn a financial return -
investing
the chance that an investments value will decrease is an …
investing risk
is a document that gives the financial history of a corporation
annual report
government actions that affect business profits are called …….
political risk
sections of newspapers containing financial data are called the ….
financial pages
a person who buys and sells securities for clients -
full-service broker
they provide financial data for interpretation -
investor services
……….. buy and sell securities for clients for a reduced commission
discount brokers
professional investment planners -
financial advisers
the spreading risk among many types of investments is called
diversification
a formula used to estimate time or rate to double your $$ -
rule of 72
they represent ownership in a corporation
stocks
are debt obligations of corporations or a government
bonds
are pools money of many investors and buys a large selection of securities
mutual fund
a contract issued by an insurance company that pays a series of regular payments, usually after retirement
annuity
is purchased for less than its maturity value -
discount bond
are contracts to bu and sell commodities for a specified price on a specified future date
futures
low-priced stocks of small companies that have no track record are called …….
penny stocks
is the right, but not the obligation, to buy or sell a commodity or stock for a specified price within a specified time period
option
