AOF: FLASHCARDS - CTE Review (Financial Literacy)

Front

An account in which money is kept in a bank or credit union for safekeeping. Money can be easily withdrawn by writing checks or using an ATM or debit card.

Back

Checking Account

Front

An account in which money is kept in a bank or credit union for the purpose of accumulating funds over a period of time and earning interest. Options: Savings Account, Line of Credit, Checking Account, Safe Deposit Box

Back

Savings Account

Front

What is a commercial bank?

Back

offers a broad range of deposit accounts and gives loans to individuals and businesses.

Front

Credit Union

Back

A non-profit institution owned by its members and provides financial services to its members.

Front

What is the advantage of Casey having a credit card in her own name?

Back

If she pays her bills promptly, she is establishing a good credit history.

Front

If the demand for software engineers increases more rapidly than for office clerks, what would you expect to happen to the average pay for the two occupations?

Back

The pay for software engineers will go up relative to the pay for office clerks.

Front

How risky is an investment with a return averaging 25% per year?

Back

Much riskier than most stocks

Front

Rachel has found a great apartment that costs $800 per month. To move in, her new landlord requires the first month's rent in advance, plus a damage deposit equal to a month's rent. If she signs a year's lease and does no damage to the apartment, what must she pay before moving in and what will she get back when she moves out?

Back

She must pay $1,600 before moving in and gets back $800 when she moves out.

Front

Caleb has decided to invest $1,000 in a bond that has a return rate of 6%. Use the Rule of 72 to determine how many years it will take for his original investment to double.

Back

12 years

Answer explanation

Answer Explanation: The Rule of 72 is a simple way to estimate the number of years required to double the invested money at a given annual rate of return. By dividing 72 by the annual rate of return (6% in this case), you get the approximate number of years it will take for the investment to double. So, 72 divided by 6 equals 12 years.

Front

When you buy a consumer durable good, such as a new refrigerator, and the person making the sale keeps trying to sell you an extended warranty on the product, what does that tell you?

Back

The store is probably making a big profit on the extended warranty because it costs much more than the estimated costs of repairs.

Answer explanation

Explanation: Stores often make significant profits on extended warranties because the cost of the warranty is usually much higher than the average cost of repairs, which is why salespeople push them.