Chapter 5: The Banking System Flashcards
A person that purchases a $10,000 CD at 10% for 5 years, will receive______ at maturity
10000 * .10 * 5 = $5,000 simple interest
10000 + 5000 = $15,000 at maturity
If you save $10,000 this year and invest it in a CD at 3% for one year, you will earn _________ in interest.
10000 * .03 * 1 = $300 interest
Typical bank services are:
Checking accounts
Savings accounts
Safe Deposit boxes
Cashier’s Checks
What can happen if you bounce a check?
You would have Non-Sufficient Funds
What are some advantages of internet banking
Balances checked at any time
Transferring money between accounts
Online/electronic bill payments
Banks make money by charging _____ interest rates on loans
Higher
The formula to calculate simple interest is
I = Principal x Rate x Time
A card issued by your bank that is linked to your bank account that allows you to make purchases in a store or withdraw money at an ATM
Debit Card
What insures your money in the bank in the event of bank failure
FDIC
A type of bank account that gives a modest interest rate and can be withdrawn fairly easily
Savings Account
Fees charged by your bank
Service Charges
A type of endorsement that limits the use of a check
Restrictive
A type of bank account that is used to make deposits and withdrawals regularly
Checking Account
A check that you wrote but it has not appeared on your bank statement yet
Outstanding Check
A check written that does not have enough money in the account to cover it is referred to as
Bounced Check
Returned Check
Non-Sufficient Funds
A numerical code on the bottom left of a check used to identify the bank
Routing Number
The process of making sure your check register and bank statement balance at the end of the month
Bank Reconicliation
A tool used to keep a running balance of your account including checks written, withdrawals, deposits and fees
Checkbook Register
Money deducted from a checking or savings account
Withdrawal
What are the 6 steps to completing a check
Date Pay to the order of Amount in numbers Amount in words Memo (optional) Signature
A written order to a bank to pay the state amount to the person or business named
Check
Money added to a checking or savings account
Deposit
The FDIC insures what types of accounts
Checking
Savings
Certificates of Deposit
The banks record of an account holders transactions sent every month
Bank Statement
Why might you open a checking account
Checks are safer than cash
Checks serve as proof of payment
Money is FDIC protected
A check you have written that has been cashed or deposited into the payee’s account
Canceled Check
When you make a mistake on a check you can
Void it
A deposit that you have made to your account that does not appear on your bank statement yet
Deposit in Transit
A loan that banks offer to protect them when they write a check for an amount more than what is in their account
Overdraft Protection
Which type of bank account will usually pay the most interest
Certificate of Deposit
A form of payment for workers so they do not have to physically go to the bank to deposit money
Direct Deposit
The difference between the amount that the bank gives out on deposited funds and charges on money to borrowers
Spread
A card that allows you to make purchases in stores and online but must be repaid (similar to a loan)
Credit Card
A card issued by the bank that only allows you to withdraw money from an automatic teller machine
ATM Card
The amount of money that a bank charges someone for borrowing money
Interest
Writing FOR DEPOSIT ONLY on the back of a check is a example of which type of endorsement
Restrictive
A person who invest their money and receives compound interest will receive _____ money over time
More
Compound interest is when interest is ______ back onto the principal amount
Added
The sum of money set aside on which interest is paid
Principal
According to the Rule of 72 if $100 is invested for 10 years, what interest rate would it need to be invested at?
7.2%
FDIC stands for
Federal Deposit Insurance Corporation
If $2,000 is invested at 6% annual interest for 6 months, how much simple interest would you have
$60.00
The person writing a check is the
Drawer
According to the Rule of 72 if $100 is invested at 6 percent interest, how long will it take to grow to $100?
12 years
FDIC insures your money up to
$250,000
What occurs when someone alters a check by changing its amount to obtain more money from another person’s account?
Check fraud
A check issued against the bank’s funds is a
Cashier’s check
When you open an account in a bank what do they make you sign to give them a sample of how you sign your name.
Signature Card
