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EverFi Review Saving and Banking Answer Key

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Budgets and Saving
#1 What is a savings vehicle? Ways to save your money
#2 Define a budget. A plan for how you spend money you earn or receive
#3 Name 4 types of accounts you can open at the bank. Checking, Saving, Money Market, CD
#4 What are the 2 numbers at the bottom of a check? Account # and Routing #
#5 What is the difference between a Roth IRA and a regular IRA retirement savings account? Roth IRA's are funded with post tax money, and you don't pay taxes on your investment OR the interest when you retire. Bonus 20 points if you can tell me why this is good/bad compared to a regular IRA?
Interest
#1 What is the difference between simple and compound interest? Simple = interest on principal. Compound = interest on principal AND interest
#2 Who called compound interest the 8th wonder of the world? Albert Enstien
#3 How long will it take your money to DOUBLE at 12% interest? How did you use to figure this out? 6 years. The rule of 72. 72/12 = 6
#4 What are the TWO biggest factors when it comes to how much money you make in interest? Time and Interest Rate
#5 savings, exchange trade fund, or CD. Which has the highest interest rate? CD. 10 bonus points if you can tell me why?
Banking
#1 What does CD stand for? Certificate of Deposit
#2 What type of bank is run by its members? Credit Union
#3 What part of a check is considered leage tender? The writen part
#4 The Federal Reserve, Commercial Banks, Payday Lenders, Retail Banks...Who might charge the most for their services? Payday lenders. They are not a real bank! They loan you money and charge extremely high rates for their service.
#5 Name 4 different types of accounts. Money Market, Checking, Savings, Retirement (ROTH IRA, IRA, 401(K), 403(B))
Federal Reserve
#1 What is the common name for the Federal Reserve? The Fed
#2 Who controls the Fed? The Board of Governors
#3 How many reserve bank regions are there? 12
#4 What is the FOMC? The Federal Open Market Committee. They make decissions about how much money to put into circulation and interest rates.
#5 Name 3 of the 12 cities where we have Federal Reserve Banks Boston, New York, Philadelphia, Cleveland, Richmond, Chicago, Atlanta, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco
Random
#1 Define Liquidity. Your ability to access your money.
#2 What number is located in the bottom left corner of a check? The routing number
#3 The name of the group that insures money in the bank. FDIC - Federal Deposit Insurance Corporation
#4 True of False. If you use compound interest you make less money than simple interest, when saving in a ROTH IRA? False.
#5 Why would you put money in the freezer? To make Cold Hard CASH.
Final Question
If you save $500 every month, and you earn 10% interest compounded annually starting when you are 25 years old, how old will you be when you have $1 MILLION in the bank? 55 years old


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