Banking

Front

What is the key difference between simple interest and compound interest?

Back

Compound interest pays more than once per year.

Front

What is a financial institution owned by its members called?

Back

credit union

Front

What percentage of funds does a bank have to keep on hand in order to meet the reserve requirement?

Back

10%

Front

When a bank accepts your money, what do they do with it?

Back

They loan most of it out to people who need money for cars and homes, etc.

Front

What is the interest rate spread and why is it important?

Back

It is the difference between interest rates on loans and deposits and it is a way banks make money.

Front

What is a "run" on a bank?

Back

It is when the bank is failing and people "run" to the bank to get their money out.

Front

How does the FDIC help prevent a bank from failing?

Back

They insure the deposits in the bank so people are not as likely to take all their money out at once.

Front

Harry wants to save money in a bank account. He decides to open a _______________ account with a five-year maturity date because it offers a _________________ than a savings account does.

Back

CD; higher interest rate

Front

Which of the following is not a characteristic of a SAVINGS ACCOUNT? Safe place to store money, Money is protected by Federal Insurance, Money gains interest over time, Great way to save for something you want or an emergency

Back

Owners can write checks from the money in the account

Front

An account you can deposit money into and then write checks or use debit card to withdraw money is known as a ____________________.

Back

Checking