Question 1

Earnings on savings can be measured by the

Accepted Answer

Earnings on savings can be measured by the rate of return, which is the amount of interest or dividends earned over a period of time, usually expressed as a percentage of the initial investment.

Question 2

Will wants to open an account that will allow him easy access to his funds (by checks,ATMs,or debit card usage)from many locations and will pay at least a low interest rate.What kind of account should he open?

Accepted Answer

An interest-earning checking account would allow easy access to funds through checks, ATMs, or debit card usage, and also pay a low interest rate. This type of account is designed for those who want their money to be easily accessible but also earn some interest on their balances.

Question 3

Karen wanted a certificate of deposit that would definitely be available until the maturity date.She would NOT want to consider a

Accepted Answer

A callable CD gives the bank the option to call back the CD before the maturity date, which means Karen may not have access to her funds for the full term. The other options listed do not have this potential issue and would be suitable for Karen's needs. Therefore, the best choice for Karen would be to NOT consider a B) Callable CD.

Question 4

A certificate of deposit that has different interest levels based on the stock market performance is called a

Accepted Answer

A certificate of deposit that has different interest levels based on the stock market performance is called a Stock-indexed CD. It offers the potential to earn higher interest rates depending on the performance of the stock market index it is linked to.

Question 5

Amber wants to open an account,but she doesn't know which kind is appropriate.She is interested in earning a higher interest rate and plans to keep at least $1,000 in her account so she can avoid paying a fee.Amber wants to open her account at an investment company.What kind of account should she open?

Accepted Answer

A money market fund is offered by investment companies, typically offers higher interest rates, and may have minimum balance requirements.

Question 6

Zach wants to open an account,but he doesn't know which kind is appropriate.He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account.In addition,he plans to keep at least $1,000 in his account so he can avoid paying a fee.He definitely wants to have federal deposit insurance.What kind of account should he open?

Accepted Answer

A money market account typically offers a higher interest rate than a regular savings account and requires a higher minimum balance, which Zach plans to maintain. It also provides federal deposit insurance. While he may not be able to write as many checks as with an interest-earning checking account, he can still make a limited number of withdrawals per month without penalty. A certificate of deposit may have higher interest rates but typically requires a longer commitment to keeping the funds in the account without withdrawing, which may not be ideal for Zach's needs. A money market fund is not FDIC-insured, so it may not provide the level of security Zach desires.

Question 7

The text discusses several types of bonds.Which bond is purchased at face value and has two components to the rate of interest earned-a fixed rate as well as a rate that adjusts twice a year for inflation?

Accepted Answer

Series I bonds are purchased at face value and have two components to the rate of interest earned- a fixed rate and a rate that adjusts twice a year for inflation. This makes it a good choice for investors looking to protect their savings from inflation.

Question 8

Wanda bought a certificate of deposit and automatically received a free bike.She purchased a

Accepted Answer

The fact that Wanda received a free bike indicates that she purchased a Promotional CD, which typically come with incentives or bonuses to attract customers.

Question 9

Which of the following provides deposit insurance for credit unions?

Accepted Answer

NCUA (National Credit Union Administration) provides deposit insurance for credit unions.

Question 10

Xavier bought a certificate of deposit whose interest rate changes with the stock market.In fact,he might even earn 0% interest on his investment for a time.He purchased a

Accepted Answer

A stock-indexed CD's interest rate is tied to the performance of a specific stock index, such as the S&P 500. This means that the interest rate can fluctuate based on how the stock market is doing. Xavier's CD fits this description, as he may earn 0% interest at times, but also has the potential to earn higher interest if the stock market performs well.

Question 11

Justin needs to have access to his money in five months.The best option for his savings is a

Accepted Answer

A money market account is the best option for Justin to have access to his money in five months because he will earn a higher interest rate than a traditional savings account and can still withdraw his money without penalty. Series EE and Series I bonds have a minimum holding period of one year, while the five-year and six-month certificates of deposit have a fixed term that would not allow Justin to access his money in five months without penalty.

Question 12

The Truth in Savings Act requires financial institutions to disclose the _____ on savings accounts.

Accepted Answer

The Truth in Savings Act requires financial institutions to disclose the annual percentage yield (APY) on savings accounts.

Question 13

Earning interest on interest is called

Accepted Answer

Compounding refers to the process of earning interest on both the principal amount and any previously-earned interest, which can lead to exponential growth in savings over time. Therefore, compounding is the best choice for earning interest on accumulated savings.

Question 14

The text discusses several types of bonds.Which bond pays interest for 30 years that is exempt from state and local taxes?

Accepted Answer

The answer of The text discusses several types of bonds.Which...

Question 15

Which of the following refers to the opportunity to withdraw money on short notice without incurring a loss in value?

Accepted Answer

Liquidity refers to the ability to withdraw money on short notice without incurring a loss in value. The other options are not related to this concept.

Question 16

Which of the following is correct about inflation?

Accepted Answer

Inflation reduces the value of money, so in order to increase buying power, you need to earn a rate higher than the rate of inflation. Choice A is incorrect because even though the rate of return is positive, it is not enough to offset the higher rate of inflation. Choice B is correct because as inflation rises, the central bank may lower interest rates to stimulate economic growth. Choice C is incorrect because inflation does affect interest rates for savings accounts. Choice E is incorrect because if inflation is higher than your rate of return, your buying power will decrease.

Question 17

The insurance coverage provided by the FDIC for a savings account is ________ per depositor until January 1,2014.

Accepted Answer

The FDIC provides insurance coverage up to $250,000 per depositor until January 1, 2014. After that date, the coverage limit will return to $100,000 per depositor. Therefore, option D is the correct answer.

Question 18

If you want to buy U.S.savings bonds,you may purchase them

Accepted Answer

The answer of If you want to buy U.S.savings bonds,you...

Question 19

The text discusses several types of bonds.Which bond,which is no longer sold,electronically deposits interest into your bank account every six months?

Accepted Answer

Series HH bonds were unique in that they electronically deposited interest into the owner's bank account every six months. They are no longer sold, distinguishing them from other types of bonds mentioned.

Question 20

Another name for a regular savings account is a

Accepted Answer

A regular savings account is commonly referred to as a Passbook or Statement account.

Quiz 4: Financial Services: Savings Plans and Payment Account