Chapter 5

Question 1

Monetary Asset Management

Answer 1

The task of maximizing interest earn-
ings and minimizing fees on all of your
funds kept readily available for day-to-
day living expenses, emergencies, and
savings and investment opportunities.

Question 2

Liquidity

Answer 2

Ease with which an asset can be
converted to cash.

Question 3

Safety

Answer 3

Your funds are free from financial risk.

Question 4

Financial Services Industry

Answer 4

Companies that provide monetary
asset management and other services.

Question 5

Depository Institutions

Answer 5

Financial institutions in the United
States that are legally allowed to offer
checking and savings accounts to
individuals and businesses as well as
provide loans.

Question 6

Comercial Banks

Answer 6

A type of bank that accepts deposits
in checking and savings accounts and
provides transactional services such as
accepting deposits, making business
loans, and offering basic investment
products.

Question 7

Community Banks

Answer 7

A type of commercial bank that
focuses on providing traditional bank-
ing services in their local communities,
where they obtain most of their core
deposits locally and make many of
their loans to local businesses.

Question 8

Mutual Savings Banks

Answer 8

A type of thrift institution that also
accept deposits and make housing and
consumer loans.

Question 9

Savings Institutions (also called
thrift institutions)

Answer 9

Accept deposits and provide
mortgage and personal loans to
individuals.

Question 10

Online Banks

Answer 10

Banks that are regulated just like any
other bank, even those they operate
entirely over the Internet, yet because
they avoid the “bricks and mortar”
costs of conventional institutions they
often pay higher interest rates than
other institutions.

Question 11

Savings and loan associations
(S&Ls)

Answer 11

Thrift institutions that focus primarily
on accepting savings and providing
mortgage and consumer loans.

Question 12

Bots ( or chatbots)

Answer 12

Online texting services offered by all
financial institutions and other venders
who provide information and services,
which can conduct human-like conver-
sation formerly reserved for people.

Question 13

Credit Unions

Answer 13

Not-for-profit institutions that accept
deposits and make loans, and the
members/owners all share some
common bond, such as having the
same employer, working for or
attending the same school, or living
in the same community.

Question 14

Checking Account (Transaction Account)

Answer 14

A deposit account held at a financial
institution that performs transac-
tions that allow for withdrawals and
deposits.

Question 15

Negotiable Order of Withdrawal (NOW) Account

Answer 15

A interest-earning checking account
at a depository institution.

Question 16

Share Draft Account

Answer 16

The credit-union version of a nego-
tiable order of withdrawal (NOW)
account.

Question 17

Tiered Interest

Answer 17

The combination of a base interest
rate and a higher rate paid on
interest-earning accounts.

Question 18

Student Checking Account

Answer 18

A checking account offered by credit
unions and banks that is better for
students than another type of bank
account, usually because they offer
excellent benefits, including a low
minimum balance, minimized fees,
and free online bill pay.

Question 19

Cashiers Check

Answer 19

A check drawn on the account of the financial institution itself and, thus, backed by the institution’s finances.

Question 20

Money Order

Answer 20

A checking instrument bought for a particular amount with a fee assessed based on the amount of the order.

Question 21

Money Market Account (MMA)

Answer 21

Any of a variety of interest-earning
accounts offered by depository insti-
tutions that pays slightly high interest
rates (compared with regular savings
accounts) and offers some check-
writing privileges.

Question 22

Money Market Mutual Funds (MMMFs)

Answer 22

Money market accounts offered
by a mutual fund investment com-
pany (rather than at a depository
institution).

Question 23

Money Market Fund (MMF)

Answer 23

Money market account in a mutual
fund rather than at a depository
institution.

Question 24

Savings Account (statement savings account)

Answer 24

A deposit account held at a bank or
other financial institution that pro-
vides principal security and a modest
interest rate.

Question 25

Time Deposits

Answer 25

Funds on deposit in a savings account
(rather than demand deposits), and
technically these require that account
holders give 30 to 60 days notice for
withdrawals.

Question 26

Money Market Deposit Account (MMDA)

Answer 26

A deposit account that requires a
larger initial deposit to open (often
$2,500), and it requires a minimum
balance to be maintained, checks
must be written for a minimum
amount, and it only allows a limited
number of checking transactions per
month.

Question 27

Annual Percentage Yeild (APY)

Answer 27

Return on total interest received on
a $100 deposit for 365-day period,
given the institution’s simple annual
interest rate and compounding
frequency.

Question 28

Grace Period

Answer 28

A grace period is the time in days during which deposits or withdraw-
als can be made and still earn interest from a given day of the interest
period.

Question 29

Fixed Tome Deposit

Answer 29

A certificate of deposit that has a
specific time period that the savings
must be left on deposit; otherwise a
penalty is assessed for early withdrawal.

Question 30

Certificate of Deposit

Answer 30

An interest-earning savings instrument
purchased for a fixed period of time,
such as 6 months or 1, 2, or even 5 years.

Question 31

variable-rate (adjustable-rate)
certificates of deposit

Answer 31

Certificates of deposit that pay an
interest rate that is adjusted (up or
down) periodically.

Question 32

Interest Rate Risk

Answer 32

The risk that an investment’s value
will change due to a change in the
absolute level of interest rates.

Question 33

CD Laddering

Answer 33

A strategy in which an investor divides
the amount of money to be invested
into equal amounts to certificates of
deposit (CDs) with different maturity
dates; it decreases both interest rate
and re-investment risks.

Question 34

joint tenancy with right of
survivorship (joint tenancy)

Answer 34

The most common form of joint
ownership, especially for husbands
and wives. In this case, each person
owns the whole of the asset and can
dispose of it without the approval of
the other(s).

Question 35

Tenancy in Common

Answer 35

A form of joint ownership in which
two or more parties own the asset,
but each retains control over a sepa-
rate piece of the property rights.

Question 36

Tenancy by the Entirety

Answer 36

A type of shared ownership of prop-
erty recognized in most states, avail-
able only to married couples, where
spouses who own property as tenants
by the entirety each own an undl-
vided interest in the property, each
has full rights to occupy and use it
and has a right of survivorship.

Question 37

Electronic Money Management

Answer 37

Occurs whenever transactions are con-
ducted without using paper documents.

Question 38

Electronic Funds Transfer (EFTS)

Answer 38

When funds are shifted electronically
(rather than by check or cash) among
various accounts and to and from
other people and institutions