2.04 What Is Stock Anyway

Question: Debit Card

Answer: An electronic card issued by a bank that allows bank clients to access to their account to withdraw cash or pay for goods and services

Question: Traditional Savings or Checking Account

Answer: - Funds deposited in bank that the account holder can withdraw at will

• Easily can withdraw cash

• - Easy to use w/ debit cards/checks

• - Potential identity theft

• - Bank may charge fees

• - Doesn’t make much money

• Question: Certificate of Deposit (CD)

• Answer: Savings note issued by a bank to a despositor who places funds in savings for a set period

• - Makes better money than traditional

• - Banks charge fee if money is withdrawn prematurely

• - Requires minimum amount of money to invest

• - Safe ways to save money, but hard to withdraw from

• Question: Money Market Account

• Answer: Savings account that offers higher rate in return in exchange for deposits that are larger than normla

• - Won’t make much, but more than traditional

• - Bank charges fee if withdrawn early

• - Miminum amount in account required

• Question: Compound Interest

• Answer: Calculating interest earned based on original deposited amount plus interest already earned

• Question: Inflation

• Answer: General rise of prices

• Question: Nominal Interest Rate

• Answer: The rate quoted in loan and deposit agreements

• Question: Real Interest Rate

• Answer: The rate of interest an investor expects to receive after allowing for inflation

• Question: Individual Retirement Account (IRA)

• Answer: Allows depositor to set aside a portion of income each year. Can be withdrawn at a certain age, usually 59 1/2, or when retired.

• Question: Traditional IRA

• Answer: Depoists made of pre-tax, which means no tax is paid on the money until it’s withdrawn from the account