Cengage Chapter 6 Test Saving for the Future

The best reason to save money is to provide for future needs.

True

When you buy a house, the smaller your down payment, the smaller your monthly mortgage payments will be.

False

The biggest advantage of scholarships is that they do not have to be repaid if you complete your education.

True

Scholarships almost always come with no strings attached.

False

Generally, the amount of work-study earnings will help offset the need for student loans.

True

Earnings on principal is called interest.

True

The more often interest is compounded, the greater your interest earnings will be.

True

Credit unions are owned by the board of directors of the banks that established them.

False

Stocks and bonds issued by corporations or by the government are called share accounts.

False

Bonds represent debt, or a loan; stocks represent equity, or ownership.

True

Online savings accounts generally pay higher rates of interest than traditional savings accounts.

True

Like certificates of deposit, there is a substantial penalty for taking money out of money market accounts.

False

The more liquid an investment, the less earning potential it is likely to have.

True

People often choose their financial institution because of convenience of location and the services offered.

True

One disadvantage of using direct deposit is that your paycheck can only be deposited into a savings account, not a checking account.

False

Which of the following would be considered a long-term need?

home ownership

A typical down payment for a house is about ___ percent of the purchase price.

10 to 20

Subsidized student loans

are guaranteed by the federal government.

Work-study programs allow students to earn money by working

on campus.

Interest paid on the original principal plus accumulated interest is called

compound interest.

The widest variety of banking services is provided at a

commercial bank.

Which of the following is organized primarily to lend money for home mortgages?

savings and loan association

Savings and checking accounts at a credit union are usually called

share accounts.

Savings accounts protected by the FDIC are protected from loss for up to

$250,000.

You can authorize your employer to make automatic deductions from your paycheck each period with a(n)

payroll savings plan.

A large sum of cash you pay up front when you purchase a home is called a(n) ____ _______.

down payment

A cash allowance awarded to a student to help pay education costs is called a(n) ___________.

scholarship

Loan _____________ means that all of an individual's student loans are combined into one large loan, resulting in one monthly payment.

consolidation

A(n) _____ is a form of financial aid for educational funding that does not have to be repaid.

grant

The amount of money you deposit into a savings account is called the _________.

principal

______ ______ are not-for-profit organizations established by groups of people who pool their money.

Credit unions

A(n) _________ firm is a company that buys and sells different types of stocks and bonds.

brokerage

_________ is a measure of how quickly you can get your cash without loss of value.

Liquidity

The date on which an investment becomes due for payment is the ________ date.

maturity

______ of principal means that you are guaranteed not to lose your savings deposit, even if the bank or other financial institution fails and goes out of business.

Safety

Tommy wants to buy a new bicycle, which costs $150. His parents have promised to contribute one-fourth of the cost of the bike. The rest will have to come out of Tommy's savings. What amount will Tommy need to come up with to get the new bike?

$112.50

John and Marissa purchase their first home for $120,000. They must put 15 percent down on the purchase price as a down payment. What will the amount of the down payment be?

$18,000

Suppose you deposit $50 into a savings account that pays 6% interest. Interest is compounded annually. After three years, how much will you have in the account (assume that you make no further deposits or withdrawals).

$59.55

You deposit $100 into a savings account that pays 6% interest. Interest is compounded quarterly. After six months, how much will you have in the account (assume that you make no further deposits or withdrawals).

$103.02

JaNoel took the following coins to her bank: three rolls of nickels; two rolls of dimes; five rolls of quarters. (Each roll of nickels is worth $2.00; each roll of dimes is worth $5.00; each roll of quarters is worth $10.00.) She deposited the sum into her savings account. What was the amount of her deposit?

$66.00