Saving and Investing Quiz

Passbook account

Depositor receives a booklet in which deposits, withdrawals, and interest are recorded, average interest rate is lower at banks and savings and loans than at credit unions, and funds are easily accessible.

Statement account

depositor receives monthly statement instead of a passbook, Accounts are usually accessible through 24-hour ATMs, Interest rates are the same as passbook account, and funds are easily accessible.

Interest-earning checking

Combines benefits of checking and savings and depositor earns interest on any unused money in his/her account.

Certificates of deposit (CDs)

Bank pays a fixed amount of interest for a fixed amount of money during a fixed amount of time. No risk ,simple, no fees, offers high interest rates than savings accounts, restricted access to your money, and there’s a withdrawal penalty if cashed before expiration date (might be higher than the interest earned)

Money-market deposit account

interest-bearing account at a bank or credit union. Checking/savings account. Offered by banks and credit unions and provide the benefits and features of both savings and checking accounts.

Bonds

Lending money to another entity for an agreed upon time frame and return.

Mutual funds

Pooling money together with other investors to purchase a pre-determined collection of investments.

Stocks

Represents part ownership in a corporation.

Real estate

Buy a house, live in it, and sell it later at a profit, Buy income property (such as an apartment house or a commercial building) and rent it, Buy land and hold it until it rises in value.

Keogh plan

Allows a self-employed person to set aside up to 15% of income (but not more than $35,000 per year).

Individual retirement accounts (IRA)

Allows a person to contribute up to $5,000 of pre-tax earnings per year. Contributions can be made in installments or in a lump sum.

Roth IRA

While the $7,000 annual contribution to this plan is not tax-deductible, the earnings on the account are tax-free after five years. The funds from the Roth IRA may be withdrawn after age 59, if the account owner is disabled, for educational expenses, or for the purchase of a first home.

401 (k)

Allows a person to contribute to a savings plan from his or her pre-tax earnings, reducing the amount of tax that must be paid. Employer matches contributions up to a certain level. Contribution limit at $23,000. **You can now withdraw $1,000 from your 401k penalty and tax-free for emergencies.

Compound Interest

Interest is paid on original amount of deposit, plus any interest earned.

Shares of stock

represent the equity ownership of a corporation divided up into units, so that multiple people can own a percentage of a business.

Government bonds

The safest investment you can make. Even if the U.S. government goes bankrupt, it is obligated to repay bonds.

What has the lowest interest rates?

savings accounts (maybe)

Figuring simple interest

Dollar Amount x Interest rate x Length of Time (in years) = Amount Earned

Figuring compound interest

(Original $ Amount + Earned Interest) x Interest Rate x Length of Time = Amount Earned

Rule of 72

72/interest rate = years to double sum of money ; 72/years to double investment = interest rate required

Example of a company’s debt

corporate bond

Riskiest investments

stocks? honestly don’t know this one lol