Chapter 6 Test

The first step in a savings plan is to

• put money into savings account

• spend money on discretionary expenses

• pay yourself first

an amount of money you can easily access in case of a job layoff, illness, or unexpected expense

• Certificate of Deposit

• checking account

• emergency fund

_________ is an account designed for accumulating money for future use

• interest bearing account

• savings account

• checking account

_________ is the rate in yearly earnings from an account, including compound interest

• Annual Percentage Yield (APY)

• Annual Percentage Rate (APR)

• simple interest

_________ is a type of savings account that typically pays a higher interest rate than regular savings accounts

• money market account

• mutual funds savings account

• high yield savings account

________a savings account that requires a deposit of fixed amount of money for a fixed period of time or term; penalty for early withdrawal

• certificate of deposit (CD)

• depository savings accounts

• money market account

________ is an amount calculated using the principal(money deposited) plus the interest it earns

• simple interest

• compound interest

• annual percentage yield (APR)

The power of compound interest works BEST the longer an investment is allowed to grow

• True
• False

A savings account should be used for daily purchases

• True
• False

Experts recommend you save money in an "emergency fund." Which of these represents an expense where the emergency fund would be particularly useful?

• Monthly rent
• $150 speeding ticket
• Occasional fancy dinner or vacations
• Car insurance