Details Title: Banking Notes Description: Questions for banking chapter 4 Total Flash Cards: 49 Created: 04/27/2006 06:34:22		New Users: To study from this flashcard set, or to create your own your own study flash cards, REGISTER HERE. Existing Users: CLICK HERE. Additional Business Flashcards
Cards in this set: Term What are two categories of accounts? Definition Transaction accounts and Time deposits Term What is a transaction account? Definition An account that allows transactions to occur at any time and in any number. Term What is an example of a demand deposit? Definition A transaction account is an example of a demand deposit because it is payable on demand when every the depositor chooses Term What is a specific example of demand deposit? Definition a sales account. Term What does a check do? Definition By writing a check a depositor can withdraw money by giving written notice to the bank to pay a name person a specified amount from his or her account. Term What does a check do? Definition By writing a check a depositor can withdraw money by giving written notice to the bank to pay a name person a specified amount from his or her account. Term What is a basic checking account? Definition It’s an account that offers a few simple services form minimal cost. Term What is an interest-bearing checking account? Definition A checking account that pays interest on the balance deposited on the account Term Why is it important for consumers t look closely at fees charge and services offered for their checking accounts? Definition Its possible a basic account may actually cost more money to operate than another type of account if there are many transactions raising the fees. Term What other transactions are categorized as demand deposit transactions? Definition Travelers checks and ATS Term What is interest? Definition Interest is the price paid for the use of money Term What is the formula for calculating interest? Definition P x R x T = I Term What does each symbol in the formula stand for? Definition P= principal R= rate T= time I= interest Term What does each symbol in the formula stand for? Definition P= principal R= rate T= time I= interest Term When may interest be paid? Definition Interest may be paid one a year (annually), every six months (semi-annually), every three months (quarterly), or any other interval as defined in the accounting regulations. Term What is compound interest? Definition Its when you add interest to the principal and paying interest on the new total. Term When does the compound interest start over? Definition The compound interest starts over with a new principal every time interest is paid. Term What is the algebraic formula for compound interest? Definition F=P(1+R)^n Term What is APR? Definition APR (annual percentage rate) is the nominal rate on which interest is calculated per year. Term What is APY? Definition APY (annual percentage yield) represents the effect of compounding. Term What does money include? Definition Money includes checks, ledger transfers, and even credit Term What is the greatest factor in the flow of deposits? Definition The activity of the economy at large Term Why do economist track and analyze so much data? Definition To predict the flow of the economy Term What are some limitations of reserve requirements? Definition The fed can put more money into the economy They can take money out of the economy Term What is the discount rate? Definition The rate the fed charges for discount loans. Term How the federal reserve influence the flow of deposits? Definition They can set reserve requirement They can create or remove money Setting the discount rate Term What does this documentation protect? Definition This documentation protects both the consumer and the bank from misunderstanding the loss. Term What does this documentation protect? Definition This documentation protects both the consumer and the bank from misunderstanding the loss. Term What is account rules? Definition It explains characteristics of each type of account Term What is a deposit rate schedule? Definition It lists interest rates in effect at the time for various types of accounts Term What is a fee schedule? Definition It shows all charges that apply to each specific type of deposit account. Term What is a check hold policy? Definition It explains when deposited funds will be available for use by the consumer. Term What is a governing document? Definition It’s a name for deposit account documents Term What is a disclosure statement? Definition It provides full information about bank policies Term What is a disclosure statement? Definition It provides full information about bank policies Term What are reference to governing documents? Definition When account holders agree to abide by the rules as set forth in the rest of the governing documents Term What is a signature policy? Definition When banks keep a signature card on file with the signature of all parties to an account, whether it is solely or jointly with other persons Term What is an opening and closing account? Definition Its policies governing opening requirements that may include a specified minimum opening deposit. Term What is a deposit collection? Definition This provision is similar to the check hold policy of the governing documents, except that it goes further in explaining the effect of uncollected deposits on the account. Term What is overdraft policies? Definition Its when an account has insufficient funds to meet its obligations, it is overdrawn. Term What is minimum balance/service charges? Definition This is when the bank specifies exactly the terms for when failure to maintain minimum balance charges apply. Term What are withdrawal policies? Definition They are requirements for withdrawing funds from the bank. Term What is check policies? Definition These are policies that include requirements for accurate dating of checks and timely. Term What is an account statement policy? Definition These policies deal with the bank statement sent by the bank. Term What are waivers? Definition The account rules may also contain notices about carious waivers, such as the customer agreeing to waive protest of dishonored items or the banks willingness to waive certain fees. Term List three types of time deposits. Which of these are exempt from reserve requirements? Definition Savings Accounts Certificates of Deposits (CDs) Money Market Deposit Accounts The money market deposit accounts are exempt from the reserve requirements. Term Why is compound interest such a powerful savings tool? Definition Compound interest is such a powerful savings tool because you are adding interest to the principal and paying interest on the new total. Term Why are governing documents necessary? Definition Governing documents are necessary because they help customers with questions about policies and procedures related to their accounts. Term How do governing documents and account rules differ Definition The differ because governing documents are to help customers with questions about policies and procedures related to their accounts and account rules explain characteristics about each type of account.