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Income Beginner: Introduction to Deposit Accounts

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1.
The higher the interest/dividend rate paid, the higher the minimum balance a deposit account usually requires.
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True. The tradeoff for higher earnings rates is letting the financial institution hold more of your money.
2.
Because deposit accounts pay relatively low yields, investors have little need of them.
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False. Deposit accounts can be useful tools for accumulating investment capital, sheltering funds during market downturns, and maintaining a supply of liquid cash.
3.
All of the following are advantages of deposit accounts except _______.
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High rates of return. High rates of return are not an advantage of deposit accounts, which typically pay lower returns than other investment opportunities.
4.
How much of your deposit account is insured by the FDIC or NCUA?
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$250,000 ($250,000 for retirement plan accounts). The FDIC or NCUA insures each depositor up to these limits.
5.
Funds 'swept' from your asset management account are deposited into _______.
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A money market account. This lets unallocated funds earn a higher rate.