Lesson 46 pg. 131 - 135

Question 1

Define transaction account

Answer 1

transaction account - an account that allows checks to be written up to the dollar amount that the account holder has deposited

Question 2

Define check

Answer 2

check - an account holder’s written order that authorizes his bank to withdraw funds from his account

Question 3

Describe checking account

Answer 3

> most common type of bank account
popular form of transaction account
checking account - an account that allows checks to be written up to the dollar amount that the account holder has deposited

Question 4

Define savings account

Answer 4

savings account - a bank account that allows the account holder to earn interest on his deposits

Question 5

Define CD or certificate of deposit

Answer 5

CD (certificate of deposit) - an account that guarantees a certain interest rate and has a specified maturity date

Question 6

Define money market account

Answer 6

money market account - an account that allows limited transactions and pays an interest rate that changes with the demand for loans

Question 7

Describe the Federal Deposit Insurance Corporation

Answer 7

> insures the money in each type of account for up to $250,000
was created by Congress shortly after thousands of people lost their savings in bank crashes during the Great Depression

Question 8

Define insurance

Answer 8

insurance - a contract between two parties in which one party protects the other against certain types of loss in exchange for payments called premiums

Question 9

Define pension plan

Answer 9

pension plan - an arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work

Question 10

Describe a defined benefit plan

Answer 10

> an employer promises to pay an employee a certain amount per month after retirement based upon the employee’s salary and length of service
employees are not responsible for contributing money to the plan

Question 11

Describe a defined contribution plan

Answer 11

> such as a 401(k) plan, an employer does not promise an employee any certain amount upon retirement, and the employee, the employer, or both are required to contribute regularly to a special tax-sheltered retirement account set up for the employee
this money placed in pension plans is invested in stocks, public and private bonds, and other investments