Chapter 10 Questions- Check Your Understanding
1. A savings account is more liquid than a certificate of deposit because you can
withdraw your money at any time without penalty. Liquidity is the ability of an
asset to be converted into cash quickly without loss of value.
2. To earn a higher interest rate, the tradeoff you will likely have to make is lower
interest. A regular savings account generally pays the least amount of interest of
the savings options.
3. The way the interest paid on a money market account is different from interest
paid on a regular savings account is a regular savings account generally pays
the least amount of interest of savings options. Also, the interest rates on money
accounts go up and down with the stock market, unlike regular savings accounts.
Money market accounts also require a minimum balance and they have
restrictions on the number of checks you can write over a period of time and the
minimum amount for which you can write each check. A regular account usually
earns a lot rate because you can maintain a low minimum balance and withdraw
money as needed. A certificate of deposit is a time deposit that earns a fixed
interest rate for a specified length of time. A maturity date is the date on which an
investment becomes due for payment. A money market account is a combination
savings-investment plan in which money deposited is used to purchase safe,
Chapter 10 Questions- Think Critically
1. I do buy things I wish I hadn’t. If I had the money back, I would put it into my
savings account so I would gain more money over time.
2. I do know someone who is “happy” and at peace with their life. Their lifestyle
consists of waking up everyday, and not working, and enjoying their life without a
mortgage, which my parents still have. They go out a lot for shopping and food,
and seem to be pretty happy with themselves.