Chapter 4: Managing your Cash and Savings
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| Annual percentage yield (APY) | The amount of interest paid each year, given
as a percentage of the investment. The APY
makes it possible to compare interest rates
across accounts that have different compounding
periods.
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| Brokerage firm | A nondepository financial institution that
helps its customers buy and sell financial
securities.
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| Cash management | Management of cash payments and liquid
investments.
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| Cash reserve | Liquid assets held to meet emergency cash
needs.
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| Certificate of deposit (CD) | An account that pays a fixed rate of interest
on funds left on deposit for a stated period
of time.
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| Commercial bank | A depository institution that offers a wide
variety of cash management services to
business and individual customers.
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| Compounding | The frequency with which interest is calculated
and added to an account.
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| Credit union | A nonprofit depository institution that is
owned by its depositors.
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| Demand deposit accounts | Deposit accounts, such as checking
accounts, from which money can be withdrawn
with little or no notice to the financial
institution.
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| Depository institutions | Financial institutions that obtain funds
from customer deposits.
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| Discount bonds | Bonds that sell for less than their face value.
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| Federal Deposit Insurance Corporation (FDIC) | A government-sponsored agency that insures customer accounts in banks and savings
institutions.
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| Life insurance company | A nondepository financial institution that
obtains funds from premiums paid for life
insurance, invests in stocks and bonds, and
makes mortgage loans.
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| Maturity date | For a CD, the date on which the depositor
can withdraw the invested amount and
receive the stated interest.
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| Money market mutual fund | A mutual fund that holds a portfolio of
short-term, low-risk securities issued by the
federal government, its agencies, and large
corporations and pays investors a rate of
return that fluctuates with the interest
earned on the portfolio.
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| Money market account | A savings account which pays interest that
fluctuates with market rates on money
market securities.
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| Mutual fund company | A nondepository financial institution that
sells shares to investors and invests the
money in financial assets.
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| Mutual savings institution | A savings institution that is owned by its
depositors.
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| Nondepository institutions | Financial institutions that get funds from
sources other than deposits.
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| Negotiated order of withdrawal (NOW) account | A type of checking account that pays interest.
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| Overdraft protection | An arrangement by which a financial institution
places funds in a depositor’s checking
account to cover overdrafts.
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| Regular checking account | A checking account that does not pay interest
and requires the payment of a monthly
service charge unless a minimum balance is
maintained in the account.
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| Rule of 72 | A method of calculating the time it will take
a sum of money to double that involves
dividing 72 by the rate of interest earned on
the funds.
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| Savings and loan (S&L)association | A depository institution that receives funds primarily from household deposits and uses
most of its funds to make home mortgage
loans.
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| Stock-held savings institution | A savings institution that is owned by stockholders.
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| Stop payment order | An order by which a financial institution
promises not to honor a check that a depositor
has written.
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| Time deposit account | A savings account from which the depositor
may not withdraw money, without penalty,
until after a certain amount of time has
passed.
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| U.S. savings bonds | Bonds issued by the U.S. Treasury that pay
interest that fluctuates with current Treasury
security rates and that are exempt from
state and local taxes.
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| Web-only financial institutions | Financial institutions that do not have physical
locations but offer a menu of cash management
accounts, loans, and investments.
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| Wire transfer | Electronic transmittal of cash from an account
in another location. A wire transfer
requires payment of a fee.
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