| A | B |
|---|
| passbook savings account | depositor receives a booklet in which all transactions are recorded |
| statement savings account | depositor receives monthly statements instead of a passbook |
| interest-earning checking account | combines benefits of checking & savings--earns interest on unused money |
| money-market deposit account | checking/savings account;interest varies with size of balance & current market rates |
| certificates of deposit | no risk--bank pays fixed amount of interest for a fixed amount of money for a fixed time |
| rising-rate CDs | higher rates at various intervals, such as every 6 months |
| stock-indexed CDs | earnings based on the stock market |
| callable CDs | higher rates & long-term maturities (10-15 yrs);bank may "call" the account if interest rates drop |
| global CDs | combine higher interest with a hedge on future changes in the dollar compared to other currencies |
| promotional CDs | attempt to attract savers with gifts or special rates |
| simple interest calculation | dollar amount X interest rate X length of time = amount earned |
| compound interest calculation | original $ amount + earned interest X interest rate X length of time = amount earned |
| The Truth in Savings Act | requires financial institutions to disclose the following information on savings account plans they offer |
| APY | annual percentage yield |
| Years to double your investment | 72 divided by interest rate you can get = years to double your investment |
| Interest rate that will double your money | 72 divided by years to double investment = interest rate required |
| bond | an "IOU" certifying that you loaned money to a government or corporation & outlining terms of repayment |
| corporate bonds | sold by private companies to raise money |
| municipal bonds | issued by any non-federal government |
| federal government bonds | safest investment you can make |
| mutual funds | professionally managed portfolios made up of stocks, bonds, & other investments |
| balanced mutual fund | includes a variety of stocks & bonds |
| global bond mutual fund | corporate bonds of companies from around the world |
| global stock fund | stocks from companies in many parts of the world |
| growth fund | emphasizes companies that are expected to increase in value--also has higher risk |
| income fund | features stock & bonds with high dividends & interest |
| industry fund | invests in stocks of companies in a single industry |
| municipal bond fund | features debt instruments of state & local governments |
| regional stock fund | involves stocks of companies from one geographic region of the world (i.e. Asia or Latin America) |
| stock | represent ownership of a corporation..stockholders own a share of the company & receive dividends if company profits |
| ways to invest in real estate | buy a house, land or income property & later sell at a profit |
| capital gains | profits from the sale of a capital asset such as stocks, bonds, or real estate & are tax-deferred until the asset is sold |
| individual retirement account (IRA) | allows a person to contribute up to $2,000 of earnings per year-tax is paid when money is withdrawn |
| Roth IRA (also called IRA Plus) | annual contribution is not tax deductible but after 5 yrs. the earnings are tax-free |
| 401(k) | employer matches contributions up to a certain level & allows person to contribute $ on pre-tax earnings |
| Keogh Plan | allows a self-employed person to set aside up to 15% of income but not more than $35,000 per year |
