PF (FINAL)

b. Banks loan out money that they have received from depositors at a higher rate of interest than the interest they pay to their depositors.

b. The bank gives people a higher rate of interest when the person is willing to leave money on deposit with the bank for a longer period of time.

c. If an account has a high degree of liquidity, it means that the account owner can easily and quickly access the funds in the account

<p>d. Checking accounts are good for a young person to use when saving for a large purchase such as a car.</p> Signup and view all the answers

<p>c. checking account, NOW account, savings account, one-year CD</p> Signup and view all the answers

<p>b. She should put $1,500 in a two-year CD, $600 in a checking or NOW account, and keep $150 in cash.</p> Signup and view all the answers

<p>a. pay a higher rate of interest and require depositors to maintain a larger minimum balance than other types of checking accounts.</p> Signup and view all the answers

<p>d. The APY will show the actual interest rate earned as opposed to the stated rate after the frequency of compounding is taken into effect.</p> Signup and view all the answers

<p>b. A young person can take advantage of the benefits of compounding by starting to invest a small amount of money regularly from an early age.</p> Signup and view all the answers

<p>d. Person B’s account had longer to benefit from the compounding of interest.</p> Signup and view all the answers

<p>a. If withdrawals are made from an IRA before the age of 59½, the person has to pay a 10% penalty plus taxes on the amount of money withdrawn.</p> Signup and view all the answers

<p>b. Earnings from a Roth IRA are never taxed whereas withdrawals from a traditional IRA are taxed.</p> Signup and view all the answers

<p>a. As people are living longer in retirement, employers have greater financial risk as they must keep paying the retirees their pensions as long as they live.</p> Signup and view all the answers

<p>c. Her yearly contributions to the plan are tax deductible; therefore, they reduce the amount of income on which she has to pay taxes.</p> Signup and view all the answers

<p>b. This benefit is like getting a raise or free money since the employer is giving the person extra money in the form of contributions to the person’s retirement account.</p> Signup and view all the answers

<p>a. It is the amount of time that an employee has to work before he is fully eligible for an employer’s benefit such as a retirement plan.</p> Signup and view all the answers

<p>c. It will be $7,500</p> Signup and view all the answers

<p>d. Annuities: a financial product that guarantees an employee the same income in retirement as she earned during the last three years that she worked at the company.</p> Signup and view all the answers

<p>• $6000<em>1.05=$6300 at the end of the first year. $6300</em>1.05=$6615 at the end of the second year. Therefore, your total interest earned is $6615- 6000=$615.</p> Signup and view all the answers

<p>• $4,000 + $4,000 = $8,000</p> Signup and view all the answers

<p>• ($2,000 * (1.03)2 + ($2,000 * 1.03) + $2,000 = $2,121.80 + $2,060 + $2,000 = $6,181.80.</p> Signup and view all the answers

<p>• ($1,200 * .02) + ($4,000 * .035) = $24 + $140 = $164</p> Signup and view all the answers

<p>• $10,000 * .10 = $1,000 (penalty is 10%)</p> Signup and view all the answers

<p>• $3,000 * .05 = $150</p> Signup and view all the answers

<p>• $5,000 * 1.06 = $5,300 at the end of the first year. She will earn $5,300 * .06 = $318 in interest for the second year.</p> Signup and view all the answers

<p>• $2,000 + .50($2,000) = $3,000</p> Signup and view all the answers

<p>b. Banks loan out money that they have received from depositors at a higher rate of interest than the interest they pay to their depositors.</p> Signup and view all the answers