The Ultimate Money Market Accounts Quiz

By: HowStuffWorks.com Contributors

The Ultimate Money Market Accounts Quiz
Image: Photodisc/Getty Images

About This Quiz

Today you told your friend how happy you are with you savings account balance. Your friend asked what rate of interest your bank is paying on the account. When you told her, she suggested that you would do much better with one of several money market accounts. Take this quiz to help you decide where to put your money.
What is a money market account?
a brokerage account used for stock trading
a bank account for exchanging currencies
a savings account with special conditions
A money market account is similar to a regular savings account and is also offered to consumers by banks and credit unions. Money market accounts have more restrictions than a regular savings account.

Advertisement

What is the difference between a money market account and a regular savings account?
A money market account pays a higher rate of interest than a savings account.
A money market account typically pays a higher rate of interest than does a regular savings account. The down side is that money market accounts often require a high minimum.
A money market account carries a higher risk if dollar trading takes a dip.
A money market account is not insured like a savings account.

Advertisement

What amount do most banks require that you maintain for a minimum balance in a money market account?
$750 to $1,150
$1,000 to $2,000
Most banks require that you maintain a minimum balance in the range of $1,000 to $2,000 and there is generally a penalty for slipping below the required minimum.
$2,000 to $2,800

Advertisement

What is another difference between money market accounts and savings accounts?
Money market accounts allow an account holder to write a limited number of checks.
Unlike a typical savings account, money market accounts allow a limited number of checks per month. The number of checks that you may write in a month is usually limited to three.
Money market accounts allow the account holder to withdraw 50 percent of the balance without a fee.
Money market accounts allow the account holder to make an unlimited number of withdrawals a month.

Advertisement

Is money that is deposited in a money market account insured against loss if the bank should fail?
no
yes
All monies in a money market account are protected by insurance in case your bank should fail. There is no risk of losing the money that you invested in a money market account.
insurance is optional

Advertisement

What year was the Federal Deposit Insurance Corporation created?
1962
1953
1933
The Federal Deposit Insurance Corporation was created as an independent federal agency in 1933, because so many banks failed during the Great Depression. The purpose of deposit insurance was to allay fears that people had about trusting banks with their money.

Advertisement

What is the primary method banks employ to make money?
Banks make most of their money by lending money at a higher rate of interest than the interest that they pay on deposits.
Banks make most of their money by lending money that people deposit. They lend money at higher rates of interest than the interest that they pay for having money deposited in their bank.
Banks make most of their money by charging fees for processing money instruments like checks and bonds.
Banks make most of their money by investing money on deposit on stocks and bonds.

Advertisement

How do banks typically calculate the interest that they pay on a money market account?
Interest is calculated on the current balance in your account on the last day of a month.
Interest is calculated on the money in your account compounded daily and paid monthly.
Money market accounts usually earn compound interest. The beauty of compound interest is that the bank is paying you interest on your cash in addition to interest on the money that they paid to you in interest.
Interest is calculated on the average monthly balance in your account calculated on the last day of a month.

Advertisement

How much will a bank be likely to charge you for every withdrawal that exceeds the maximum allowed in a month?
$3 to $5
$5 to $10
Most banks charge $5 to $10 for every withdrawal that you make above the maximum allowed limit. It is important to make sure that you stay within the allowed number of withdrawals to avoid hefty fees.
$12 to $15

Advertisement

What is a key to keep in mind when working with your money market bank account?
To make the most on your money, do all of your banking with a money management account.
Treat your money market account like a savings account and make regular deposits.
Try to treat your money management account like a savings account so you can maximize your interest earnings. Make the largest regular deposits to the account that you can manage on your budget and watch your money grow.
You will only earn compound interest on a money management account if your monthly deposits exceed $500.

Advertisement

You Got:
/10
Photodisc/Getty Images

Featured