What Are Interest-Paying Checking Accounts and How Do They Work? Most interest-p

Question

What Are Interest-Paying Checking Accounts and How Do They Work? Most interest-paying checking accounts exhibit characteristics of both checking and savings accounts. Specifically, they earn relaively high rates of interest, especially compared with regular savings accounts, and allow relatively limited check-writing privileges. They are available through depository and nondepository institutions, including commercial banks, savings banks, credit unions, stock brokerage firms, mutual funds, and other financial services companies What are some of the important characteristics of the following four major types of interest-paying checking accounts? AMA: Asset Management Accounts MMDA: Money Market Deposit Accounts MMMF: Money Market Mutual Funds NOW: Negotiable Order of withdrawal Read the following statements and then indicate the money market accounts to which each pertains. Check all that apply. Use the following abbreviations for the types of accounts: AMA MMDA MMMF NOW Funds invested in this account can be withdrawn at any time. This account allows excess funds to be swept into higher interest rate-paying accounts Given your understanding of the fundamental characteristics of the four major types of interest-paying checking accounts, assess the scenario that follows.

Explanation / Answer

AMA : A comprehensive brokerage account that includes a credit or debit card, margin loans and automatic transfer between accounts as well as access to reduced-rate loans and other perks.

MMDA: it is a savings account that may earn a higher annual percentage yield than a traditional savings account, but it require higher minimum balance than a standard savings bank account.

MMMF: It is an open ended mutual fund that invests in short term debt securities and funds invested in this account can be withdrawn at any point of time.

NOW: It is an interest earning bank account. A customer with such an account is permitted to write drafts against money held on deposits.

1. Funds invested in this account can be withdrawn at anytime - MMMF

2. This accounts allow excess funds to be swept into higher interest rate paying accounts -   AMA

Jacob's Case:

Jacob should not invest in = MMMF

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