Chapter 3

Question 1

529 plan

Answer 1

funds set aside
for post–secondary education
expenses as either prepaid
tuition or college savings
account; also called a qualified
tuition plan

Question 2

certificate of deposit
(CD)

Answer 2

an instrument issued by
a bank that guarantees the
payment of a fixed interest
rate for holding a sum of
money until a designated time
in the future; also called time
deposits

Question 3

checking account

Answer 3

an account that allows the
holder to write checks against
deposited funds, and use
automated cash machines,
electronic debits, and debit
cards

Question 4

checking account

Answer 4

an account that allows the
holder to write checks against
deposited funds, and use
automated cash machines,
electronic debits, and debit
cards

Question 5

401(k) plan

Answer 5

a form of
retirement plan, wherein
employees and employers
can make tax-deferred
contributions to a trust and
direct the funds to be invested
across a number of provided
options, taking payment when
they retire or leave
employment

Question 6

mortgage

Answer 6

a type of
long-term loan used to buy
property, where the property is
held as collateral until the loan
is paid in full

Question 7

foreclosure

Answer 7

legal process
by which the lender can seek a
court-ordered sale of the
property due to nonpayment
by the borrower; money from
the sale of the property goes
to paying off the debt of the
mortgage

Question 8

home equity

Answer 8

market
value of the house minus any
loans secured by the house

Question 9

home equity line of
credit (HELOC)

Answer 9

line of
credit secured by a mortgage
on a home; similar to a
credit card

Question 10

reverse mortgage

Answer 10

loan secured by the value of
one’s home which the
homeowner receives either in
monthly payments or a lump
sum from the lender

Question 11

demand deposit
account

Answer 11

a transaction
account that is payable on
demand; commonly referred to
as a checking account

Question 12

credit union

Answer 12

a nonprofit
depository institution that
serves members who have a
common affiliation

Question 13

overdraft fee

Answer 13

charge
assessed by the financial
institution for taking more
money out of the account than
is in it

Question 14

financial
intermediaries

Answer 14

financial
institutions that accept money
for deposits and then lend the
money to others

Question 15

private banker

Answer 15

customer
service representative and/or
loan officer trained to provide
special services and help meet
the financial needs of high net
worth customers