Financial Algebra Chapter 3 Flashcards

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Questions and Answers

What is a checking account?

An account at a bank that allows a customer to deposit money, make withdrawals, and make transfers from the funds on deposit.

What happens when a check is canceled?

The money of the check is received and becomes canceled.

What does EFT stand for?

Electronic Funds Transfer.

What does it mean to have a hold on an account?

When the funds are not available for a check to be cashed. Signup and view all the answers

What is direct deposit?

Depositing payroll or government checks directly into an account. Signup and view all the answers

Who is the drawer in a financial transaction?

The party who owns the account. Signup and view all the answers

What does it mean to endorse a check?

Signing or electronically signing a check to receive the funds. Signup and view all the answers

What is an ATM?

Automatic Teller Machine. Signup and view all the answers

What is a single account?

An account where only one person can withdraw from the account. Signup and view all the answers

What is a joint account?

An account where there is more than one owner who can make withdrawals. Signup and view all the answers

What is overdraft protection?

A service that pays a check even though there are not enough funds in the account. Signup and view all the answers

What is a PIN?

Personal Identification Number necessary to use an ATM. Signup and view all the answers

Who is the payee?

The person or entity to whom the check is written and who receives the funds. Signup and view all the answers

What is a debit?

A withdrawal. Signup and view all the answers

What is a credit?

A deposit. Signup and view all the answers

What is a bank statement?

A document that lists all transactions that occurred for a statement period, approximately 1 month. Signup and view all the answers

What does reconciling mean?

Verifying the bank's records to ensure no mistakes have been made. Signup and view all the answers

What is an outstanding deposit?

Deposits that do not appear on the bank statement. Signup and view all the answers

What is an outstanding check?

Checks that do not appear on the bank statement. Signup and view all the answers

What is a statement period?

The dates when the transactions occurred. Signup and view all the answers

What is a savings account?

An account where the bank pays interest for the use of the money deposited. Signup and view all the answers

What is a statement savings account?

An account that provides a monthly statement showing all activity including deposits, withdrawals, interest earned, and any fees. Signup and view all the answers

What is the simple interest formula?

I = (p)(r)(t) Signup and view all the answers

What is a money market account?

An investment requiring a greater initial deposit and a minimum balance, typically offering a higher interest rate. Signup and view all the answers

What is a CD?

Certificate of Deposit, which states you have a specific sum on deposit and guarantees a fixed interest rate. Signup and view all the answers

What does maturity mean in financial terms?

The specified date in the future when a financial agreement completes. Signup and view all the answers

What is an interest rate?

The percentage base of interest applied to a principal amount. Signup and view all the answers

What is compound interest?

Money earned on the money deposited, plus previous interest. Signup and view all the answers

What is annual compound interest?

Interest compounded once for each year. Signup and view all the answers

What is semiannual compound interest?

Interest compounded twice per year, every 6 months. Signup and view all the answers

What is quarterly compound interest?

Interest compounded four times per year, every 3 months. Signup and view all the answers

What is monthly compound interest?

Interest compounded twelve times per year, every month. Signup and view all the answers

What is daily compound interest?

Interest compounded every day, 365 days in a year or 366 in a leap year. Signup and view all the answers

What is the compound interest formula?

B = p (1 + r/n) ^(n)(t) Signup and view all the answers

What does APR stand for?

Annual Percentage Rate. Signup and view all the answers

What does APY stand for?

Annual Percentage Yield. Signup and view all the answers

What is continuous compounding?

An account that compounds infinitely many times per year. Signup and view all the answers

What is the value of 'e' in continuous compounding?

It is the exponential base used in the continuous compounding interest formula. Signup and view all the answers

Study Notes

Banking Basics

A Checking Account allows customers to deposit, withdraw, and transfer funds.
A check is Canceled once the money has been received.
EFT (Electronic Funds Transfer) facilitates electronic movement of money between banks.
A Hold occurs when funds are temporarily unavailable for cashing checks.
Direct Deposit sends payroll or government checks straight into an account.
The Drawer is the account owner who writes checks.

Check Handling

To cash a check, it must be Endorsed, either by signature or electronically.
ATMs (Automatic Teller Machines) provide 24/7 access to banking services.
A Single Account permits only one individual to make withdrawals, while a Joint Account allows multiple owners to access the funds.
Overdraft Protection enables checks to be paid even if there are insufficient funds in the account.
A PIN (Personal Identification Number) is required for ATM usage.
The Payee is the individual or entity to whom the check is made out.

Transactions and Statements

A Bank Statement summarizes all transactions for a given period, typically one month.
Reconciling involves verifying bank records to ensure accuracy.
Outstanding Deposits and Outstanding Checks are transactions not yet reflected in the bank statement.
The Statement Period specifies the range of dates for recorded transactions.

Savings Accounts

A Savings Account earns interest on deposited funds.
Statement Savings accounts provide monthly statements detailing all activities, including interest earned.
The Simple Interest Formula is defined as I = (p)(r)(t).

Investment Options

A Money Market account involves higher interest rates, requires a larger minimum deposit, and may limit monthly transactions.
CDs (Certificates of Deposit) guarantee a fixed interest rate and payment until a specified maturity date.

Interest Concepts

Maturity refers to a predetermined future date for financial products.
Interest Rates dictate the earnings on deposited money.
Compound Interest earns money on both the original deposit and accumulated interest.

Types of Compound Interest

Annual Compound Interest is compounded yearly.
Semiannual and Quarterly Compound Interest occur twice and four times a year, respectively.
Monthly Compound Interest is compounded each month, while Daily Compound Interest compounds every day throughout the year.

Interest Calculations

The Compound Interest Formula is represented as B = p (1 + r/n) ^(n)(t).
APR (Annual Percentage Rate) uses the annual interest rate for calculations.
APY (Annual Percentage Yield) provides a comparison of interest rates based on compounding.

Advanced Concepts

Continuous Compounding refers to an account compounding interest infinitely.
The letter "e" is the mathematical constant used in calculations involving continuous compounding interest.

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Description

Test your knowledge of key terms in Financial Algebra Chapter 3. These flashcards cover essential concepts such as checking accounts, cancellations, and electronic funds transfers. Perfect for students looking to reinforce their understanding of financial literacy topics.