Chapter 5



Unit 3 Questions

1. What’s direct deposit? What are its advantages and disadvantages? Would you utilize it? Why or why not?

A:

2. What are the differences between a credit union and a bank?

A:

3. You have an ATM card and you use it once a week at the Chevron station ATM. The transaction fee is $3.50 per transaction. How much are you paying for transaction fees in one year (52 weeks in a year)?

A:

4. What is overdraft protection? How does it work? How can it save you in the future?

A:

5. What is the purpose of the checkbook register? How often should you use it?

A:

6. Why is it important to get your OWN checking account?

A:

7. List one of the three limitations of a certificate of deposit.

A:

8. Compound Interest Problem: Let us say you receive $5,000 for graduation. You take it to a stockbroker and he/she invests it into a high-risk stock. You decide to let it sit for 20 years and it averages a 12 percent rate of return. Please Google/use an investment calculator to answer the questions below (show math):

a) How old will you be at the end of the 20 years?

b) How much is your total portfolio worth?

c) How much did you make in interest alone?

d) Do you feel like this will be enough money to retire on in 20 years? Why or why not?

9. Simple Interest Problem: Let us say you are 35 and have just bought a brand new house in Cashmere, Washington. After careful research, you have discovered the median home price in Cashmere is $325,000; and, you are going to buy the ‘average’ house in Cashmere. As you know, you will need 20 percent of the purchase price in the form of a down payment. What’s more, you are going to borrow money for 30 years at 5.5 percent. Please Google/use a mortgage calculator to answer the questions below (show your math):

a) How old are you when you finally pay off this house?

b) How much will you have to save for a down payment?

c) How much will you have to borrow?

d) How much did you pay in interest over the course of 30 years?

e) What did your original loan actually turn into after 30 years (total amount)?

f) Same scenario…but now you take out a 20 year loan instead of a 30 year loan…how much do you pay in interest now?

g) How does this make you feel as a potential home owner?

10. Another Simple Interest Problem: Let us say you take out $100,000 in student loans (from ages 18-22) and the bank will not charge you interest and/or have you make a payment until you are completed with college. Let us now say you are done with college and your loan interest rate is 5 percent with a term of 10 years. Please Google/use a student loan calculator to answer the questions below (show math):

a) What is your age when you are finished with this loan?

b) What is your monthly loan payment?

c) How much are you going to just pay in interest over the course of this loan?

d) How does this make you feel in regard to taking out a student loan?

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