Personal Finance 5.02

Which is a feature of a certificate of deposit (CD)?

• Funds deposited in a CD are held for a certain length of time.

• Funds deposited in a CD have tiered interest rates.

• Funds deposited in a CD are very liquid.

• Funds deposited in a CD can be accessed via check or debit card.

Which is a feature of a money market deposit account?

• No minimum balance requirements

• Unlimited transactions every month

• Tiered interest rates

• The money must remain in the account for a specific period of time

Which correctly describes the security level of savings tools?

• Savings tools are not secure because they have a high risk of losing money.

• Savings tools are secure because they are protected by the U.S. government against loss.

• Savings tools are very secure because there are not risks involved with saving or investing.

• None of the above is true. It would be safer to keep the money at home in a shoe box.

Brett plans to save money toward purchasing a car. His coworker is telling him about a money market account he has that offers a tiered interest rate. What is Brett’s coworker talking about?

• The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he would earn.

• The amount of money he earns depends on the number of accounts he has at the depository institution, i.e. the more accounts he has, the higher interest rate he will earn.

• Brett’s coworker is talking about something that is illegal. A tiered account is promoted by scam artists who trick people into investing money in hopes of earning higher rates over time.

• The rate of interest earned increases over time, i.e. leaving money in the account for 3 months would earn a lower interest rate than leaving money in the account for 12 months.

Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which savings tool should Hannah choose?

• Certificate of deposit

• Checking account

• Money market deposit account

• Any of the above savings tools

In relation to other options, how liquid is a savings account?

• More liquid than cash

• Less liquid than mutual funds

• More liquid than a certificate of deposit

• More liquid than a checking account