# Banking Notes

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Banking Questions for Chapter 4

Created Dec 7, 2006
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 Side A Side B 1 What are time deposits? Deposits that are held for or mature at a specified time. 2 What are some examples of time deposits? Savings accounts, checkable deposits. Money market deposit accounts and (CD) Certificate of... 3 Two examples of Savings Accounts Passbook savings account and Statemnent Savings accounts. Savings accounts are among the safest... 4 What is a certificate of deposit? A certificate offered by a bank that guarantees payment of a specified interest rate until... 5 What is interest? The price paid for the use of money. Interest is expressed by percentages. 6 Calculating Interest Principal multiplied by rate and time equals Interest. Months are expressed in decimals 6 months=... 7 What is compound interest? Adding interest to principal and playing interest on the new total. 8 Simple Interest 5% Compound Interest 5% 9 What us annual percentage rate? The normal rate in which interest is calculated per year 10 What is annual percentage yield? Represents the effect of compounding 11 List three types of time deposits. Which of these are exempt form the reserve requirements. Money market deposit accounts Savings accounts Savings accounts 12 What do the terms in the formula P x R x T = I stand for? P is principal, R is rate, T is time, and I is interest. 13 What is a transaction account? Why are transaction accounts considered deposits? a. A transaction account allows transactions to occur at anytime and in any number. b. Its... 14 How does the frequency at which interest is compounded change the effect of the compounded... It changes the effect because it would make the interest rate rise more frequently than if... 15 3. Why is APY more useful measure for comparing interest rates that APR a. APY is more useful because the rate percentage is dependant on how much you deposit whereas... 16 What does money include? Money includes checks, ledger transfers, and even credits 17 How do reserve requirements impact the flow of money? If reserve requirements are high than the money supply contracts because banks must keep more... 18 What are the 2 ways the Fed can influence the money supply and the flow of deposits. Fed can put more money into the economy by buying securities or by creating new money. This... 19 What is the discount rate? The rate the feds charges the banks for loans 20 Why are governing documents necessary? Documents are necessary because it helps customers so that questions about their accounts have... 21 How do governing documents and account rules different? The difference between documents and rules are that documents tell about the account where... 22 How does the federal reserve influence the flow of deposits a. The Federal Reserve sets a reserve requirement. If the rate is high than there is more money... 23 What is the greatest factor in the flow of deposits? Why do economist track and analyze so... a. The activity of the economy at large. Economist track and analyze so much data so that...