Term
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Definition
| Deposits that are held for or mature at a specified time. |
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Term
| What are some examples of time deposits? |
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Definition
| Savings accounts, checkable deposits. Money market deposit accounts and (CD) Certificate of Deposit. |
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Term
| Two examples of Savings Accounts |
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Definition
| Passbook savings account and Statemnent Savings accounts. Savings accounts are among the safest places to put money because it is i8nsured by the FDIC (Federal deposit Insurance Corp.) |
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Term
| What is a certificate of deposit? |
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Definition
| A certificate offered by a bank that guarantees payment of a specified interest rate until a designated date in the Future. |
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Term
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Definition
| The price paid for the use of money. Interest is expressed by percentages. |
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Term
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Definition
| Principal multiplied by rate and time equals Interest. Months are expressed in decimals 6 months= 0.5 years. |
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Term
| What is compound interest? |
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Definition
| Adding interest to principal and playing interest on the new total. |
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Term
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Definition
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Term
| What us annual percentage rate? |
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Definition
| The normal rate in which interest is calculated per year |
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Term
| What is annual percentage yield? |
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Definition
| Represents the effect of compounding |
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Term
| List three types of time deposits. Which of these are exempt form the reserve requirements. |
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Definition
Money market deposit accounts
Savings accounts
Savings accounts |
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Term
| What do the terms in the formula P x R x T = I stand for? |
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Definition
| P is principal, R is rate, T is time, and I is interest. |
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Term
| What is a transaction account? Why are transaction accounts considered deposits? |
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Definition
a. A transaction account allows transactions to occur at anytime and in any number.
b. Its an example of a deposit because it is payable on demand whenever the depositor chooses. |
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Term
| How does the frequency at which interest is compounded change the effect of the compounded interest rates? |
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Definition
| It changes the effect because it would make the interest rate rise more frequently than if it didn’t rise at all. It would add a higher interest rate on your deposits more frequently. |
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Term
| 3. Why is APY more useful measure for comparing interest rates that APR |
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Definition
| a. APY is more useful because the rate percentage is dependant on how much you deposit whereas the APR is the annual yearly percentage and based on a whole years deposit. |
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Term
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Definition
| Money includes checks, ledger transfers, and even credits |
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Term
| How do reserve requirements impact the flow of money? |
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Definition
| If reserve requirements are high than the money supply contracts because banks must keep more money in the bank but if then rate is low banks are free to loan out more money. |
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Term
| What are the 2 ways the Fed can influence the money supply and the flow of deposits. |
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Definition
| Fed can put more money into the economy by buying securities or by creating new money. This new money is called raw money. The fed can effectively take money out of the economy if they felt they needed to slow the economy. They do this by selling treasury securities. The money they earn from the sale of these securities does not go into the bank account it effectively disappears. |
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Term
| What is the discount rate? |
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Definition
| The rate the feds charges the banks for loans |
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Term
| Why are governing documents necessary? |
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Definition
| Documents are necessary because it helps customers so that questions about their accounts have clear answers. |
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Term
| How do governing documents and account rules different? |
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Definition
| The difference between documents and rules are that documents tell about the account where as rules are the legal steps. |
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Term
| How does the federal reserve influence the flow of deposits |
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Definition
| a. The Federal Reserve sets a reserve requirement. If the rate is high than there is more money in the bank. They can set their own rate. They can adjust the rate. |
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Term
| What is the greatest factor in the flow of deposits? Why do economist track and analyze so much data? |
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Definition
a. The activity of the economy at large. Economist track and analyze so much
data so that they will know exactly how much money is circulating in the world. They want to be able to understand big patterns. |
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