Chapter 4: Managing Your Cash and Savings Flashcards
study for exam #2
Routine, daily administration or cash and near-cash resources (liquid assets, such as interest checking account, savings account, money market deposit, CDs, T-bill, & U.S. Savings bond [EE]).
cash management
one should only write checks at certain times, avoid carrying checkbook and debit card, plan spending limit before shopping, and establish an ongoing savings program to manage…
cash.
Stocks are riskier than bonds.
true
the lower interest rates of 2007-2008 helped reduce the costs of financing the federal budget deficit.
true
what do higher or lower interest rates cause investors to lose money?
lower
who benefits the most from low interest rates?
borrowers
what do low interest rates mean for savers?
it seems useless to save so less people save
what industry offers all kinds of financial products and services?
financial service industry
what are the 2 types of financial institutions?
- depository
- Non depository
commercial banks, Savings and Loan associations, savings banks, and credit unions constitute what type of financial institution?
depository
what type of financial institution doesn’t accept deposits?
non-depository
depository banks are either government-insured or state-insured.
true
what is the amount of Deposit Insurance Protection provided by depository financial institutions to protect against loss?
$250,000/depositor
securities bought through the bank aren’t covered by Deposit Insurance Protection.
true
how can you increase your Deposit Insurance Protection?
open multiple accounts in different names, like joint accounts w/ partner’s name and each have separate accounts too.
what acts require all banks to clearly disclose fees, rates, and terms and to use the standard annual percentage yield (APY) formula on compounding, must notify customers of rate changes 30 days prior, and bases interest on average deposit balance?
Truth in Savings Act of 1993
Type of account where the bank must permit the withdrawal of funds.
checking account (demand account)
how do you put money in an account?
deposit
if you write a check, use a debit card, or withdraw cash from a checking account, you are…
withdrawing from the account.
type of account with no interest where service charges can be waived if minimum balance of $500-1,000 is maintained.
regular checking account
regular checking accounts are only offered by commercial…
banks.
type of account that is expected to remain on deposit longer and, therefore, has the benefit of higher interest rates.
savings account (time deposit)
1) Negotiable Order of Withdrawal (NOW) accounts
2) Money Market Deposit Account (MMDAs)
3) Money Market Mutual Funds (MMMF)
4) Asset Management Account (AMA) OR Central Asset Account
These are known as?
interest-paying checking accounts
type of interest-paying checking account where financial institutions pay interest on a $500-1,500 requirement (although, there is technically no legal minimum).
Negotiable order of withdrawal (NOW) accounts
type of interest-paying checking account that is convenient, safe (federally insured), requires a minimum balance of $1,000 or more, allows use of checks and access to ATMs, and has a limited number of free transactions with a fee on the remainder.
money market deposit accounts (MMDAs)
which interest-paying checking account has the highest interest rates?
money market deposit accounts (MMDAs)
type of interest-paying checking account that pools funds of many small investors to purchase high-return, short-term marketable securities.
money market mutual funds (MMMF)
money market mutual funds have an interest rate of what percentage range higher than savings accounts?
1-3% higher
you can access funds from money market mutual funds (MMMF) by check writing of less than $…
500.
type of interest-paying checking account that combines checking, investing, and borrowing activities.
asset management accounts (AMA) OR central asset accounts
offered by brokerage houses and mutual funds. includes MMDAs, unlimited checking, Visa and Mastercard debit, ATM use, brokerage loan accounts. supplies extra funds through loans. has no deposit insurance, but has Securities Investor Protection Corporation to protect it).
asset management accounts (AMA) OR central asset accounts
what type of interest-bearing account automatically “sweeps” excess account balances into higher-return money market mutual funds (MMMF)?
asset management accounts (AMA) OR central asset accounts
system that can complete transactions via telecommunication and computers.
electronic funds transfer system (EFTs)
type of EFT that transfers funds from your bank account to recipient’s account.
debit cards