Introduction To Savings

1. Which of the following financial services is best suited for saving money over a period of years?

Certificate of deposit

Checking account

Demand deposit

Mortgage loan

2. This type of savings vehicle requires a minimum amount to open, has a short term, and restricts the number of withdrawals you can make.

MMA

CD

Passbook Savings

IRA

3. Compared to commercial banks, credit unions generally offer _______.

Higher interest rates on loans

Fewer financial services

Higher interest on savings

Lower fees and loan rates

Both c and d

4. Which of the following is most liquid?

Certificate of deposit

Money market account

Savings account

All of the above have the same level of liquidity

5. What is the relationship between the interest rate and liquidity of savings vehicles?

The interest rate is a product of liquidity

Higher interest rates are offered in exchange for lower liquidity

There is no correlation between these factors

Higher interests rates are offer in exchange for higher liquidity

6. If you deposit $100 at 6% interest compounded annually. At the end of two years, what will the total value in your account?

160

112

112.36

224

7. You will earn a higher interest rate when you _____________.

Buy a certificate of deposit

Use an ATM

Open a savings account

Open an interest-bearing checking account

8. APY or annual percent yield accounts for _____________.

Compound interest earned by a deposit

How much a deposit will earn over the course of one year

All of the above

9. Bonus: The strategy that maximizes your return with CD laddering involves the following: _________________

Spreading your money across several CDs that have different term or maturity dates

Placing all your money in the shortest-term CD and when they mature, ladder up to longer-terms ones when they

Shopping the market for the best rates or highest rung rate across various financial institutions

None of these strategies