Sunday, December 4, 2011

Match the #s with letters?

1 Funds cannot be removed from this savings account until the end of a certain period of time


2 A type of loan used to buy real estate


3 The amount borrowed in a loan


4 The largest source of income for banks


5 Provide the most services and play the largest role in the economy of all types of lending institutions


6 Requires customers to use a PIN


7 Institutions that give installment loans to consumers


8 A feature of modern banking that allows you to transfer, deposit and withdraw money 24 hours a day


9 Type of bank which originally introduced NOW accounts


10 A banking system that only keeps a portion of the funds on hand and loans out the remainder





A. Fractional Reserve Banking


B. Principal


C. Automated Teller Machine


D. Debit Card


E. Commercial Banks


F. Savings Banks


G. Federal Reserve System


H. Credit Cards


I. Default


J. Stored Value Cards


K. Mortgage


L. Money Market Mutual Funds


M. Finance Companies


N. Interest


O. Certificate of Deposit|||I'm sure your textbook has all the answers. :)





However, I'll tell you this: your guesses are right so far...and I'll give you one of the harder ones. A is #10. Fractional reserve simply means that they keep (e.g. reserve) a percentage (fraction) of the money you deposit, then loan out the remainder. They make the assumption that customers won't ask for more than a small amount of their money at any one time, and earn money from the interest paid by loaning out the rest. In fact, that's why they pay you interest - as a fee for loaning out your money. :)





Most banks today have moved away from a fractional reserve into a sort of floating reserve, though...

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