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Meaning / Definition of

CollegeSure CD

Categories: Finance,

CollegeSure CDs are certificates of deposit designed to let you prepay future college costs at today's rates, plus a premium based on the child's age and the amount you invest.The CDs, which are issued by the College savings bank of Princeton (NJ), pay annual interest rates linked to increases in an index of average college costs and are available with terms from one to twenty-two years.While these CDs are insured by the federal deposit insurance corporation (FDIC), the interest they pay is taxable, unless you own them within a coverdell education savings account (ESA), participating state 529 plan, or roth ira. With the roth ira option, the account must be open for at least five years and you must be at least 59 1/2 to qualify for tax-free withdrawals. CollegeSure CDs are sold in whole or partial units. At maturity, each whole unit is guaranteed to pay the average cost of one year of tuition, fees, and room and board at a four-year private college. If you decide to purchase only a partial unit, it will be worth only that portion of the average yearly college cost at maturity. If the intended beneficiary decides not to go to college, you can get the entire principal and interest calculated at the guaranteed rate back when the CD matures and use it for any purpose.However, if you choose to cash in the CD before its maturity date, you'll owe a penalty of 10% of the principal during the first three years of its term. The penalty drops to 5% for the remaining years of the CD's term, except for the last year, which carries a 1% penalty.

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Definition / Meaning of

Money Supply

Categories: Economics,

The money supply is the total amount of liquid or near-liquid assets in the economy. The federal reserve, or the Fed, manages the money supply, trying to prevent either recession or serious inflation by changing the amount of money in circulation. The Fed increases the money supply by buying government bonds in the open market, and decreases the supply by selling these securities.In addition, the Fed can adjust the reserves that banks must maintain, and increase or decrease the rate at which banks can borrow money. This fluctuation in rates gets passed along to consumers and investors as changes in short-term interest rates.The money supply is grouped into four classes of assets, called money aggregates. The narrowest, called M1, includes currency and checking deposits. M2 includes M1, plus assets in money market accounts and small time deposits. M3, also called broad money, includes M2, plus assets in large time deposits, eurodollars, and institution-only money market funds. The biggest group, L, includes M3, plus assets such as private holdings of us savings bonds, short-term us treasury bills, and commercial paper.

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