Exploring Savings Account Interest Mechanics

What does interest represent in financial terms?

• A credit score

• The cost of borrowing money

• A type of bank account

• A financial statement

What does APY stand for?

• Annual Percentage Yearly

• Automated Payment Yield

• Annual Payable Yield

• Annual Percentage Yield

Which of the following is true about savings account interest rates?

• They can vary significantly from one bank to another

• They are regulated by the federal government

• They do not affect the earnings from the account

• They are the same across all banks

What could be a reason to choose a bank offering higher APY?

• To minimize earnings

• To maximize earnings

• To avoid taxes

• To reduce account fees

What would be the interest earned on a $5,000 balance at 1% APY after one year?

• $500.00

• $5.00

• $0.50

• $50.23

How is interest added to the savings account balance?

• Monthly

• Annually

• Daily

• Weekly

What is compounding interest?

• A government-regulated interest rate

• Interest calculated on the initial deposit and previous interest earned

• Interest calculated on the initial deposit only

• A fixed interest rate applied over five years

How much would you earn in the first month with a 1% APY on a $5,000 balance?

• $4.17

• $5.00

• $0.50

• $50.23

What is the role of FDIC as mentioned in the context of Discover Bank?

• It insures deposits

• It provides loans

• It manages interest rates

• It audits banks