Chapter 10

Question 1

Advantages/Disadvantages of Regular Savings Acct.

Answer 1

Adv...
-higher liquidity 
-very safe
Disadv...
-lower interest rate

Question 2

Advantages/Disadvantages of Certificate of Deposit (CD’s)

Answer 2

Adv...
-higher interest rate (than savings)
-safe
Disadv...
-penalty for withdrawal 
-maturity date

Question 3

Advantages/Disadvantages of Money Market FUND

Answer 3

Adv...
-low risk, very liquid
-interest rate usually higher than savings 
Disadv...
-not insured by the FDIC

Question 4

a deposit that is set aside for a specified length of time at a specified rate

Answer 4

CD (certificate of deposit)

Question 5

a regular account at a credit union

Answer 5

share account

Question 6

money that is paid for the use of money

Answer 6

interest

Question 7

deposits kept in credit unions are insured by the ________

Answer 7

NCUA

Question 8

federal insurance for depositors in commercial banks and savings and loans is provided by the _____

Answer 8

FDIC

Question 9

interest drawn on the sum of the original principal plus interest

Answer 9

compound interest

Question 10

occurs when student loans are combined into one large loan

Answer 10

loan consolidation

Question 11

a form of educational funding that does not have to be repaid, is often funded by the government, and is in addition to scholarships and loans

Answer 11

grant

Question 12

Why should you save? (3 things)

Answer 12

1) short term needs
2) long-term needs
3) financial security

Question 13

list some examples of short-term needs

Answer 13

vacations, emergencies

Question 14

list some examples of long-term needs

Answer 14

more than 5 yrs away

Question 15

why do you need financial security

Answer 15

peace of mind knowing that you can pay your bills

Question 16

you should have __ months of income in a savings account always!!!!!

Answer 16

6

Question 17

How does your money grow? (4 ways)

Answer 17

1) principal
2) interest
3) compound interest
4) APY (annual percentage yield)

Question 18

the capability of financial resources being readily converted to cash

Answer 18

liquidity

Question 19

the amount of money you place in a savings (the $$ YOU deposit)

Answer 19

principal

Question 20

money paid to YOU

Answer 20

interest

Question 21

interest on your interest

Answer 21

compound interest

Question 22

amount of interest you yield in a year

Answer 22

APY

Question 23

a type of savings plan that offers a more competitive interest rate than a savings account

Answer 23

money market fund (account)

Question 24

the greater the ____ you are willing to take, the higher rate of interest you will receive

Answer 24

risk

Question 25

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

Answer 25

direct deposit

Question 26

needs you expect to have in the next few months or years are called ________

Answer 26

short-term needs

Question 27

money borrowed for education, can be subsidized or unsubsidized

Answer 27

student loans

Question 28

the day on which a certificate must be renewed or cashed in

Answer 28

maturity date

Question 29

when a CD is cashed before its maturity date, the depositor must pay a _____ penalty

Answer 29

early withdrawal

Question 30

the FDIC insures a depositor's money up to $_______

Answer 30

$250,000

Question 31

Where can you save? (5 places)

Answer 31

1) commercial banks 2) savings banks 3) savings & loan associations 4) credit unions 5) brokerage firms

Question 32

What are the 3 savings options?

Answer 32

1) regular savings account 2) certificate of deposit (CD) 3) money market account

Question 33

this place sells securities/stocks & bonds

Answer 33

brokerage firms

Question 34

these are more prevalent in the south (more than savings banks)

Answer 34

savings and loan associations

Question 35

similar to commercial banks, non-profit

Answer 35

credit unions

Question 36

2 ways to save regularly...

Answer 36

1) direct deposits | 2) automatic payroll deductions (ATM)