Banking and Financial Concepts

Type of account that typically offers the highest interest rate

• Savings account

• Certificate of deposit

• Money market account

• Checking account

Main purpose of creating an emergency fund

• To avoid unexpected debt

• To increase monthly expenses

• To invest in stocks

• To save for a vacation

Recommended action when expenses exceed income

• Reduce discretionary spending

• Increase income through a second job

• Ignore the expenses

• Invest in stocks

Key characteristic of a Roth IRA

• Tax-free withdrawals in retirement

• Tax-deductible contributions

• Mandatory minimum distributions at age 72

• Higher contribution limits than traditional IRAs

Primary purpose of multifactor authentication in banking

• Protect against unauthorized access

• Increase transaction speed

• Reduce banking fees

• Enhance customer service

Formula used to calculate net worth

• Total assets minus total liabilities

• Total income plus total expenses

• Total investments divided by total savings

• Total revenue minus total costs

Distinguishing feature of revolving credit from installment credit

• Fixed repayment schedule

• Reusable credit line

• One-time loan disbursement

• No interest charges

Characteristic of the 'retired couple' stage in the family life cycle

• Increased leisure activities

• Reduced income needs

• Higher healthcare expenses

• Greater family responsibilities

Type of financial institution most appropriate for someone seeking a nonprofit option

• Credit union

• Commercial bank

• Investment bank

• Payday lender

Main purpose of the Federal Deposit Insurance Corporation (FDIC)

• Protect bank deposits

• Regulate interest rates

• Issue currency

• Provide loans to businesses